Asahi Kasei Report 2017

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income) reached a new record high with gain on sale of investment securities and decreased income taxes. ...... New York
Asahi Kasei Report 2017

We, the Asahi Kasei Group, contribute to life and living for people around the world.

Group Mission

Group Vision

Providing new value to society by enabling “living in health and comfort” and “harmony with the natural environment.”

Group Values

Sincerity—Being sincere with everyone. Challenge—Boldly taking challenges, continuously seeking change. Creativity—Creating new value through unity and synergy.

Group Slogan

Creating for Tomorrow

Editorial policy

Organizational scope

For greater ease of understanding among our stakeholders, since fiscal 2014 we are integrating information regarding our business strategy and financial performance, which had been published in our Annual Report, with information regarding our CSR activities, which had been published in our CSR Report, in a single Asahi Kasei Report. We hope that the Asahi Kasei Report will help you gain a clear perception of the Asahi Kasei Group’s efforts toward sustainability in society in addition to our management strategy, business conditions, and management configuration.

The scope of the report is Asahi Kasei Corp. and its consolidated subsidiaries, except with respect to Responsible Care, in which case the scope is operations in Japan that implement the Asahi Kasei Group’s Responsible Care program. Asahi Kasei’s three operating segments are Material, Homes, and Health Care. Unless otherwise specified, the titles and positions of corporate officers and other personnel as shown in this report are current as of October 2017.

Period under review The period under review is fiscal 2016 (April 2016 to March 2017). Some qualitative information pertaining to April to September 2017 has also been included.

Guidelines consulted The Global Reporting Initiative’s Sustainability Reporting Guidelines G4, ISO 26000, and other guidelines were consulted during the preparation of this report. Disclaimer

In this report, the TM symbol indicates a trademark or registered trademark of Asahi Kasei Corporation, affiliated companies, or third parties granting rights to Asahi Kasei Corporation or affiliated companies.

The forecasts and estimates shown in this report are dependent on a variety of assumptions and economic conditions. Plans and figures depicting the future do not imply a guarantee of actual outcome.

Contents

   2 Message from the President

Management Overview   14 Interview with the CFO   16 History of Providing Solutions for the Challenges of Society   18 Feature 1: P  rocess of Creating Value in the Asahi Kasei Group   20 Feature 2: V  alue Provided by the Asahi Kasei Group  24 Directors   26 Corporate Governance   30 Specific Measures to Heighten Compliance   33 Feature 3: Global Executives Interviews

Review of Operations   38 Financial and Non-Financial Highlights   40 At a Glance  42 Material  44 Homes   46 Health Care   48 Feature 4: Research & Development

CSR  52 CSR   54 CSR Fundamentals • Responsible Care • Respect for Employee Individuality • Corporate Citizenship

Financial Section   64 Management’s Discussion and Analysis   70 Risk Analysis   72 Consolidated Financial Statements

Corporate Information 104 Major Subsidiaries and Affiliates 107 Company Information 107 Investors Information

Asahi Kasei Report 2017

1

Message from the President

We, the Asahi Kasei Group, contribute to life and living for people around the world. “Improve human culture.” These words of Shitagau Noguchi, the founder of Asahi Kasei, manifested the company’s mission of meeting shortages of daily necessities at the time our business began nearly a century ago. Ever since then, we have continuously adapted to meet the changing needs of the times, with business in fields ranging from fibers and chemicals to homes, health care, and electronic devices. Though the content of our operations has evolved, our aspiration to help the people of the world enjoy a better life remains unchanged. Our current Group Mission is to contribute to life and living for people around the world, and we operate in accordance with our Group Vision of providing new value to society by enabling “living in health and comfort” and “harmony with the natural environment.” The world around us is dramatically different than it was a century ago. We now have many challenges to be solved as indicated by the Sustainable Development Goals (SDGs) adopted by the United Nations in 2015. Our aim is to contribute to society’s solutions to such challenges by leveraging the strengths we gain by having an unparalleled diversity of business operations, technologies, and human resources. In doing so, we will provide value to the world in a way that only Asahi Kasei can. We are now advancing our medium-term management initiative “Cs for Tomorrow 2018” that aims to provide solutions to two important challenges faced by society for “clean environmental energy” and “healthy/comfortable longevity with peace of mind.” Our management environment has changed significantly in just the past year, including heightened environmental awareness as evinced by the Paris Accord taking effect and the spread of electric vehicles, changing global market frameworks, and the rapid advance of new technologies for IoT, AI, etc. Nevertheless, we see no need to change our basic concept. While the importance of the two challenges faced by society remains unchanged, there is a greater urgency for us to build connections among our diverse businesses and diverse human resources as we build the base for the next phase. In fiscal 2016, the first year of Cs for Tomorrow 2018, the realignment of our business sectors proceeded smoothly and we achieved solid business performance. We will further accelerate the execution of Cs for Tomorrow 2018 as we work to create a portfolio of high-profitability and high value-added businesses in fiscal 2025. The Asahi Kasei Report 2017 showcases our proactive efforts under Cs for Tomorrow 2018 to “contribute to life and living for people around the world,” as illustrated in special features such as “Value Provided by the Asahi Kasei Group” and “Global Executives Interviews.” I hope this report will help you gain a greater understanding of Asahi Kasei. September 2017

Hideki Kobori President

2

Asahi Kasei Report 2017

Asahi Kasei Report 2017

3

Message from the President

Performance in fiscal 2016 exceeding our original forecast During fiscal 2016, the outlook for the global economy remained obscure with increased political uncertainty related to the withdrawal of the UK from the EU and increased concern regarding the economic policy of the new US administration, as well as concern of economic slowdown in emerging economies. Meanwhile, the Japanese economy continued on a path of gradual recovery with strong corporate performance while consumer spending became firm as the employment situation and income environment improved. With our transformation to an operating holding company configuration in fiscal 2016, we reconfigured our operations into the three business sectors of Material, Homes, and Health Care. Thanks to careful preparation, the transition went smoothly. While our performance was generally firm, net sales, operating income, and ordinary income each declined from the previous year due to the impact of the strong yen, decreased pharmaceutical reimbursement prices, and full-year amortization of goodwill associated with our acquisition of Polypore International. Operating income was nevertheless the second highest ever and net income attributable to owners of the parent (net income) reached a new record high with gain on sale of investment securities and decreased income taxes. Owing to exceptional efforts in each business to expand sales expansion and reduce costs, operating income, ordinary income, and net income all exceeded our original expectations. All in all, fiscal 2016 was a good step forward as the first year of our Cs for Tomorrow 2018 medium-term management initiative. Forecasting higher shipment volumes in each business, we expect fiscal 2017 results to further improve with net sales reaching ¥1.99 trillion and operating income reaching ¥165 billion.

4

Asahi Kasei Report 2017

The first year of our Cs for Tomorrow 2018 medium-term management initiative saw steady progress. Net income reached a new record high. In addition to transitioning to an operating holding company configuration and realigning our business sectors in fiscal 2016, we also took several actions to enhance connections such as reconfiguring our R&D organization, launching Asahi Kasei Europe, and establishing our Automotive Marketing Department. To heighten awareness for compliance we established a Risk Management & Compliance Committee.

FY2018 Target Net sales and operating income

Net sales Operating income

Net sales (left scale) Operating income (right scale) (¥ billion) 3,500 3,000 2,500

¥2.2 trillion

¥180.0 billion

FY2016 Result Net sales Operating income

¥1.9 trillion

¥159.2 billion

FY2025 Outlook Net sales Operating income ¥

¥3.0 trillion

280.0 billion

(¥ billion) 350

FY2017 Forecast Net sales Operating income

¥2.0 trillion

300

¥165.0 billion

250

2,000

200

1,500

150

1,000

100

500

50 0

0

'11

'12

'13

'14

'15

'16

'17

'18

'25

(FY)

* Formulated assuming exchange rates of ¥110/$ and ¥120/€

Asahi Kasei Report 2017

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Message from the President

Long-term investments During the five-year period of the previous medium-term management initiative “For Tomorrow 2015,” we adopted decisions on ¥1 trillion of long-term investment to strengthen our existing businesses and create new businesses for the future, including large-scale acquisitions of ZOLL and Polypore. Cs for Tomorrow 2018 provides for some ¥700 billion in long-term investments over the three-year period. Decisions were adopted for about ¥150 billion of investment in fiscal 2016. In the Material sector, these included an expansion of production capacity for HiporeTM lithium-ion battery (LIB) separator, construction of an R&D facility for new composite materials such as cellulose nanobeads and cellulose nanofiber, and the establishment of joint ventures for engineering resin with China National Bluestar (Group) Co., Ltd. In the Homes sector, these included forming capital alliances with Mori-Gumi Co., Ltd., and Chuo Build Industry Co., Ltd., and establishment of a new production base for steel-frame members. In the Health Care sector, decisions were adopted to augment the product pipeline. In fiscal 2017, investments in the Material sector are mainly planned in the environment/energy, automotive, and healthcare/hygiene fields. Investments planned in the Homes sector are focused on alliances to extend business outside Japan. Investments in the Health Care sector are planned to accelerate globalization and to reinforce manufacturing facilities. Overall investments are projected to be some ¥200 billion, exceeding the level of fiscal 2016. We will also continue to study M&A in all three sectors of Material, Homes, and Health Care, focusing on proactive investments in accordance with our growth strategy. We are not only considering large acquisitions on the scale of ZOLL or Polypore, but also medium or small-scale acquisitions if they would further strengthen our established businesses or bring new prospects for future business growth.

Long-term investment expenditures

FY2016

Approx. ¥150 billion

¥700 billion over 3-year period

FY2017 (planned)

Approx. ¥200 billion

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Asahi Kasei Report 2017

Growth in each sector Material With the environment/energy, automotive, and healthcare/hygiene designated as areas of focus, we executed several actions for each of them in fiscal 2016. Environment/energy

● ●

Expanded supply capacity of lithium-ion battery (LIB) separator Advanced verification of DRC process for DPC*

Reinforced business configuration (the US and Vietnam) Expanded capacity for S-SBR for fuel-efficient tires (Singapore) ● Expanded capacity for filament for airbags ●

Automotive



Expanded capacity for nonwoven fabric for facial masks Expanded capacity for spunbond for diapers ● Started sales of UVC LEDs for disinfection ●

Healthcare/hygiene



* A process for polycarbonate intermediate without using phosgene (poisonous gas) and not requiring ethylene oxide as feedstock.

In the field of the environment/energy, decisions were made to expand production capacity for HiporeTM wet-process LIB separator at two lines in Moriyama, Shiga, Japan. While demand for separators remains stable in consumer electronics applications, demand in automotive applications is projected to grow by some 30% per year. Having both HiporeTM wet-process separator and CelgardTM dry-process separator enables us to meet a wide range of market requirements in automotive applications. We are planning to raise capacity for wet-process separator to 610 million m2/year in the first half of fiscal 2019, when electric vehicle (EV) demand is projected to ramp up. After acquiring Polypore in 2015, we also raised production capacity for dry-process separator in the US—capacity is now 250 million m2/year. Combining both wet process and dry process, we plan to raise our total LIB separator capacity to 1.1 billion m2/year in 2020, solidifying our position as the world’s leader with reliable supply of high-quality products. In the automotive field, our Automotive Marketing Department is taking the lead in sectorwide marketing activity to build strategic relationships with vehicle manufacturers and their suppliers. In May 2017 we unveiled our first concept car, AKXYTM (more information on page 12). We are leveraging this drivable car to create new opportunities to communicate with people in the industry about the future of the automobile. In the healthcare/hygiene field, we are developing new markets for materials for pharmaceuticals and medical devices. We also established Healthcare Material Business Development as a dedicated organization for new business creation.

Asahi Kasei Report 2017

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Message from the President

Homes We enhanced our homes business in the three areas of medium-rise homes, overseas business, and homes for seniors. For construction materials, in the environment/energy field, we announced the development and sale of Neoma ZeusTM which features world-leading insulation performance. In the area of medium-rise homes, we enhanced our condominium business by incorporating the expertise of Mori-Gumi Co., Ltd., through a business and capital alliance, and started sale of the Hebel BuildingTM System which employs higher quality and higher precision construction of medium-rise homes by systematic manufacturing. In addition, we enriched the product lineup to meet various needs in urban areas such as buildings that integrate homes with rental units or shops. Regarding homes for seniors, we offer Hebel VillageTM apartment buildings with features designed for active seniors who are able to live independently. For overseas operations, we completed our first project, a condominium in Zhonghe, New Taipei, Taiwan. We will continue to advance measures to further strengthen our businesses with comprehensive products, construction, and services, and to expand the breadth of our value chain.

Health Care We are growing the Health Care sector to be the third major pillar of the Asahi Kasei Group after Material and Homes. For pharmaceuticals, we reinforced our lineup in the field of orthopedics with the launch of Reclast® osteoporosis drug which is administered once per year. To accelerate global expansion, we are advancing a global clinical study of RecomodulinTM anticoagulant. For medical devices, we expanded capacity in Oita, Japan, for PlanovaTM BioEX virus removal filters used in the manufacture of biotherapeutics. Critical care continues to be the driver of growth for the Health Care sector, with ZOLL averaging 15% annual growth since we acquired it in 2012 and operating income turning positive three years later even after amortization of goodwill. The LifeVestTM wearable defibrillator, our flagship product, is gaining market penetration in Germany, France, and Japan, in addition to its main market in the US. We are working to expand indications for the Thermogard SystemTM intravascular temperature management system to include acute myocardial infarction, and aiming for market leadership in the automated external defibrillator (AED) market with the launch of our new AED3TM product. We will continue to expand our range of operations in the field of acute critical care, including through proactive acquisitions to augment the product lineup. For the Health Care sector overall, we are investing to expand business in North America using our CVC (Corporate Venture Capital) Office in Boston, Massachusetts. Additionally, we periodically hold meetings of our Health Care Council consisting of members from Asahi Kasei Corp., Asahi Kasei Pharma, Asahi Kasei Medical, and ZOLL to discuss marketing activities and other matters of strategy to expand the sector.

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Asahi Kasei Report 2017

Creating new businesses in the Material sector Our transition to an operating holding company configuration enhanced connections among technologies and human resources, enabling the acceleration of new business creation. One area is new business creation connecting fiber, resin, and processing technology. For example, we are developing a new kind of textile composite in a process where polyamide (PA) 66 fiber and continuous glass fiber (GF) are commingled into a yarn which is woven to form the base material for molding, which is followed by injection of PA66 resin in a hybrid molding process. This provides a high degree of flexibility in design together with outstanding strength. Such attributes make this a promising material as a weight-saving substitute for metal in automotive structural parts. Another example is cellulose nanofiber (CNF) composite being developed for automotive applications by combining cellulose with synthetic resin. Unlike carbon fiber composite, this material is made with thermoplastic which enables separation and recyclability for reduced environmental burden. Combining the knowledge on cellulose gained through the BembergTM business of fibers and textiles with the polymer composition and processing technology gained in the chemicals business, CNF composite is an outstanding illustration of how connections between different businesses can lead to new developments. Another area of new business is the UVC LED, developed by connecting internal technology with outside resources. The UVC LED combines technology for high-quality single-crystal AlN (aluminum nitride) substrate developed by Crystal IS, Inc., which became our subsidiary in 2011 after an initial CVC investment, with the compound semiconductor technology built up through our electronics business. Featuring high sterilization efficiency, small size, and low power consumption, the KlaranTM UVC LED product commercialized in May 2016 is gaining attention as a safer and more environmentally friendly substitute for mercury lamps as a UV light source. The last one is the development of an alkaline water electrolysis system. This system developed under consignment from the New Energy and Industrial Technology Development Organization (NEDO) produces hydrogen from renewable energy at low cost. A large-scale validation electrolyzer installed in Yokohama, Japan, has operated for over 10,000 hours to demonstrate the stability of the process. With a world-leading energy conversion efficiency into hydrogen of 90%, it is able to produce 2,000 m3 of hydrogen per hour consuming just 10,000 kW of electricity under ordinary temperature and ordinary pressure. This is the same amount of hydrogen that a fuel cell vehicle would consume over a two-year period. The hydrogen can also be reacted with CO2 to produce methanol or methane for use as green fuel. We now plan to install a demonstration plant for this system in Germany, which is phasing out nuclear power by 2022.

Acceleration of globalization The basic policy for globalization under the Cs for Tomorrow 2018 medium-term management initiative is to focus on strategies suited to each region. The region of Asia is positioned not only as a manufacturing base but also as a growth market. We are proactively developing our businesses premised on production and consumption within the region. Notable actions include: ● Establishment of joint ventures for XyronTM modified polyphenylene ether (China) ● Start of photopolymers plant (China) ● Capacity expansion of S-SBR for fuel-efficient tires (Singapore) ● Capacity expansion of spunbond nonwovens for diaper applications (Thailand) ● Sale of condominiums (Taiwan)

Asahi Kasei Report 2017

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Message from the President

North America is positioned as a region of continuing growth and the origin of innovation. We are working to expand automotive and healthcare-related businesses, and to acquire leading-edge technologies through CVC. Notable actions include: ● Reinforcing our CVC activities in the environment, energy, and healthcare fields ● Advancing clinical testing of RecomodulinTM anticoagulant ● Business expansion for LifeVestTM wearable defibrillator ● Reinforcing the separator business ● Operation of second plant for plastic compounds Europe is positioned as the origin of environmental standards and regulations. We are working to expand through reinforced marketing activities centered on automotive-related business. Notable actions include: ● Launch of an Engineering Plastics Technical Center ● Advancing the alkaline water electrolysis development project ● Start of Asahi Kasei Europe GmbH

Building the base for sustainable growth Cs for Tomorrow 2018 is directed toward the establishment of a portfolio of high-profitability and high value-added businesses in fiscal 2025, with the three-year period from fiscal 2016 to 2018 focused on building the base for the next phase. (1) Obtaining thorough compliance Following the disclosure of data irregularities regarding the installation of precast concrete piles in October 2015, our subsidiary Asahi Kasei Construction Materials Corp. is taking measures to prevent recurrence by renewing its management system, performing training of site agents, and disseminating compliance policy. We also established Risk Management & Compliance in January 2016 as the central hub to aggregate all risk management and compliance-related information. We integrated our Risk Management Committee and Corporate Ethics Committee into a newly established Risk Management & Compliance Committee chaired by the President of Asahi Kasei Corp. to monitor the compliance system and identify risks throughout the Asahi Kasei Group. Through such actions, we are further strengthening our compliance system and implementing thorough measures based on the “three actuals” of the actual place, the actual thing, and the actual fact, reinforcing our foundations as a company that society can continue to trust and rely on. Top down (management perspective)

Enacting compliance policy; thorough identification of risks from birds-eye view (continuous)

Preparing and applying Asahi Kasei Group Code of Conduct Heightening awareness for risk management and compliance through organizational lines ● Enhancing organization (establishment of Risk Management & Compliance Committee) ● ●

Thorough compliance The “three actuals” of actual place, actual thing, and actual fact Reinspection for latent risks in each business Assigning priority to risks ● Studying and implementing countermeasures in accordance with priority ● ●

Bottom up (on-site perspective)

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Asahi Kasei Report 2017

Inspection for risks; implementation of measures (continuous)

(2) Laying the foundation to heighten business activities We will utilize IT to achieve dramatic improvements in the productivity of our manufacturing and production processes. We have selected model plants and are now beginning trials of actual application to incorporate new technologies such as IoT and Big Data. We are also utilizing IT to deliver high added value in the businesses themselves. The LifeVestTM and plant diagnostics are key examples of businesses that utilize ICT (information and communication technology)—the latter based on technology refined for over 40 years and recently launched as a remote diagnostic service to monitor vibrations for diagnosis of the condition of plants and transportation equipment. We are also strengthening our IT infrastructure for enhanced tools and databases that support business operations, and we continue to reinforce cybersecurity. (3) Linkage between management strategy and HR strategy We are working to create value by leveraging our diversified business platforms and diverse human resources, and the key is human resources. In order to develop a group of high value-added personnel, we will foster and strengthen our personnel and organizations. Diverse human resources Vitality and growth of personnel and organizations Group of high value-added personnel Mechanisms for growth in daily work ● Satisfaction and fulfillment by each employee ● ●

Unity and linkage between management strategy and HR strategy Business growth Actualizing vision Diversified business platforms

We will maintain thorough compliance, heightened business activity, and strengthened linkage between HR strategy and long-term growth strategy as the base of operations. Building on these, we will advance our basic strategies of “pursuit of growth and profitability,” “creation of new businesses,” and “acceleration of globalization,” contributing to a “society of clean environmental energy” and a “society of healthy/comfortable longevity with peace of mind.”

Asahi Kasei Report 2017

11

Message from the President

Drivable concept car AKXYTM In May 2017 we unveiled our first concept car, developed jointly with electric vehicle manufacturer GLM Co., Ltd., to showcase our capabilities in the automotive field. It is a drivable car featuring 27 automotive solutions from Asahi Kasei. AKXYTM will help us to actively promote our automotive-related products and technologies as we advance constructive discussions with vehicle manufacturers and their suppliers about the future of the car. Creating the future of automobiles together with customers The automotive industry is undergoing dramatic changes, with trends for more diverse automobile usage as well as the move toward electric drive. Asahi Kasei has a long track record of supplying various products to the automotive industry, including fibers, chemicals, devices, and battery materials. Now we must move beyond being just a supplier of materials. We need to be able to contribute more fully to the automotive supply chain. By leveraging our comprehensive strengths in products, technology, and quality, we can work together with customers in the automotive industry to create new value for the future. We are now working to reinforce the presence of our Material sector in the automotive industry in accordance with this objective. The AKXYTM concept car was created to represent our aspiration to work more closely with automotive customers, contributing to the greater safety, comfort, and environmental performance of vehicles of the future. We partnered with GLM to leverage their electric vehicle platform in the development of a drivable concept car equipped with a wide range of Asahi Kasei components and systems. GLM is a young company full of energy and new ideas. They are highly oriented toward the future, and it was very stimulating to work with them. By having vehicle manufacturers and their suppliers experience AKXYTM, we can deepen relationships with customers in the automotive industry and open the door to their adoption of many of our leading-edge products moving forward.

To be a material concierge that can provide automotive solutions

Tsuneyoshi Tatsuoka Outside Director

It was very ambitious of Asahi Kasei, a material manufacturer, to create a drivable concept car. The three broad trends in the automotive industry today are weight reduction by substituting plastic for metal, diversification of motive power sources with the rise of electric and fuel-cell vehicles, and intensified application of electronic and control systems throughout the vehicle. How can a material manufacturer adapt to these trends? The company would need to enhance its ability to provide one-stop solutions through technical sales as well as to be a development partner having connections with vehicle manufacturers and their suppliers. Asahi Kasei is exceptional among Japanese material manufacturers in that it has a wide variety of products including electronic devices such as sensors. Although it gives the company many potential opportunities, this alone is not enough to ensure success in global competition. I see the creation of AKXYTM as an indication of the company’s keen awareness of the need for further R&D and applications development for automotive-related products.

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Asahi Kasei Report 2017

Origin of the name and logo Deriving from Asahi Kasei X (multiplied by) You (the customer), the name indicates our intention to create new value for the future together with the automotive industry. The blue flame motif represents the transition to complete combustion, indicating our fullfledged effort beyond mere passion, which would be represented by red.

Cockpit  9. WGFTM film base reflective polarizer 10. Defroster sensor Systems 11. Vital-sign sensing technology 12. Stand-alone voice command 13. Hands-free communication 14. In-car communication 15. CO2 sensor

1. Head lamp cover Organic/inorganic hybrid coating agent 2. Lamp extension XyronTM modified polyphenylene ether 3. Tire raw material TufdeneTM solution-polymerized styrene butadiene rubber 4. Tire cord LeonaTM nylon 66 filament yarn 5. Fender liner P reciseTM spunbond synthetic continuous-filament nonwoven

6. Body paint raw material Asahi Kasei Aluminium PasteTM 7. B ody paint additive DuranateTM HDI (hexamethylene diisocyanate)-based polyisocyanate 8. Tail lamp cover DelpetTM polymethyl methacrylate

16. A-pillar T uftecTM hydrogenated styrenic thermoplastic elastomer 17. Interior decoration Multicore POFTM plastic optical fiber 18. Floor mat F loor mat with polytrimethylene terephthalate fiber

19. Connector/cable tie LeonaTM polyamide resin 20. Speaker cover EsterlloyTM ABS-based alloy resin 21. Seat surface CubitTM 3D knitting fabric 22. Headrest MEFTM moldable polyethylene foam 23. Seat skin LamousTM microfiber artificial suede 24. Seat skin lining EltasTM spunbond synthetic continuous-filament nonwoven 25. Inside door handle TenacTM metallic-colored & lowVOC grade polyacetal resin 26. Cup holders SunForceTM modified polyphenylene ether foam beads 27. LIB separator HiporeTM lithium-ion battery separator Asahi Kasei Report 2017

13

Interview with the CFO

Executing strategies aimed at future growth to increase our corporate value; promoting proactive investments for growth and a robust capital policy Shuichi Sakamoto Director Senior Executive Officer

Q

What is your basic financial strategy?

A

We are focused on consistent generation of cash flow, with an appropriate balance between investment for growth and shareholder returns.

The Asahi Kasei Group aims to consistently expand cash flow in two basic ways. One is by enhancing profitability through enhanced product performance, greater cost competitiveness, and business structure improvement, and the other is by improving capital efficiency through intragroup financing and appropriate control of inventory levels. To obtain stable and low-cost financing, we employ various fund-raising methods such as borrowing from banks, issuing bonds, and issuing commercial paper flexibly and dynamically in accordance with our financial circumstances. Primary financial metrics

FY2012

FY2013

FY2014

FY2015

FY2016

¥14

¥17

¥19

¥20

¥24

Payout ratio

36.4%

23.5%

25.1%

30.4%

29.1%

Net income per share (EPS)

¥38.43

¥72.48

¥75.62

¥65.69

¥82.34

Dividends per share

Net income per total assets (ROA)

3.3%

5.5%

5.4%

4.3%

5.1%

Net income per shareholders’ equity (ROE)

7.1%

11.7%

10.6%

8.6%

10.5%

Net income per net sales (ROS)

3.2%

5.3%

5.3%

4.7%

6.1%

Total asset turnover ratio

1.04

1.02

1.01

0.92

0.84

2.1

2.2

2.0

2.0

2.0

Net income per shareholders’ equity and interest-bearing debt (ROIC)

5.7%

7.7%

7.5%

7.1%

7.6%

D/E ratio

0.47

0.33

0.25

0.43

0.35

Financial leverage

14

Under our “Cs for Tomorrow 2018” (CT2018) management initiative, we will generate cash flow not only by implementing three basic strategies of “pursuit of growth and profitability,” “creation of new businesses,” and “acceleration of globalization,” and by further raising competitiveness of established businesses, but also by creating new added value in each sector. Cash flow generated through these efforts provides further resources to invest for growth as well as to return to shareholders. We are careful to maintain an appropriate balance between the two.

Asahi Kasei Report 2017

Q

How is your progress toward the CT2018 financial targets?

A

In fiscal 2016 we made a favorable start toward our fiscal 2018 targets.

Our aim is to build a portfolio of high value-added businesses with high profitability in 2025. The 3-year period of CT2018 is focused on building the base toward that goal, and our targets for fiscal 2018 are ¥2.2 trillion in net sales and ¥180.0 billion in operating income. We had expected fiscal 2016 to be a challenging year with reduced reimbursement prices for pharmaceuticals, the impact of the higher yen, and increased retirement expenses. But thanks to efforts in each business to expand sales and reduce costs, we achieved results above the forecast. We even exceeded our fiscal 2018 targets of 8.2% for operating margin, ¥110.0 billion for net income, 9.0% for ROE, and 7.0% for ROIC. In all, we made a good start in fiscal 2016 as the first year of the 3-year management initiative.

Fiscal 2017 will be a pivotal year as the middle year of the 3-year period. Though the operating environment changes incessantly, we find no need to change the basic approach laid out in CT2018. We will further advance our strategies toward the achievement of our objectives while each individual business adapts appropriately to change. We are targeting net sales of ¥1,990.0 billion and operating income of ¥165.0 billion in fiscal 2017. While working to expand operating income by emphasizing profitability in each business, we will continue to review our strategic shareholdings in accordance with the corporate governance code.

Q

Please tell us your perspective on funding for strategic investment, and shareholder returns including stock buybacks.

A

We will steadily advance our growth strategy as we aim for greater shareholder returns.

We plan to adopt and execute strategic investments totaling ¥700 billion over the 3-year period of CT2018. We adopted decisions on ¥150 billion of this in fiscal 2016, and another ¥200 billion is slated for adoption in fiscal 2017. We are steadily advancing measures to heighten the competitive advantages of our existing businesses and to expand production capacity for businesses operating on a global scale and for businesses with potential to garner new demand in the Japanese market. Although that leaves about half of the ¥700 billion for fiscal 2018, we are currently studying investments for non-linear growth measures including M&A to proactively expand businesses. Our funding policy to support these initiatives is to rely on borrowings in principle, while maintaining a D/E ratio of around 0.5. We will strive to maintain stable and low-cost financing, sustaining a sound financial position, as we advance our strategic investments. Our basic policy for shareholder returns is to strive for stable dividends and increased dividends through continuous earnings growth while maintaining an appropriate internal reserve to perform well-balanced investment for growth and return to shareholders. Under CT2018 we are targeting a total

return ratio of 35% in fiscal 2018, including share buybacks performed flexibly. Our fiscal 2016 dividend was raised by ¥4 to ¥24 per share, and we will remain focused on shareholder returns in accordance with our basic policy.

Dividends per share and payout ratio (¥)

(%)

30

50

35.1

24

36.4 20

19 17 15

14

29.1

30.4

14

25

25.1

23.5

0

0

'11

'12

Dividends per share (left scale)

'13

'14

'15

'16

(FY)

Payout ratio (right scale)

Asahi Kasei Report 2017

15

History of Providing Solutions for the Challenges of Society The Asahi Kasei Group has consistently grown through proactive transformation of its business portfolio to meet the evolving needs of every age. We have constantly provided products and services that form solutions to various environmental and social challenges. As society undergoes further changes, we will continue to contribute to life and living for people around the world by Creating for Tomorrow.

Founder: Shitagau Noguchi

From 1922 Shitagau Noguchi, the founder of Asahi Kasei, succeeded in Japan’s first industrial production of ammonia by chemical synthesis in Nobeoka, Miyazaki, in 1923 using technology licensed from Italy. The ammonia was used in the production of Bemberg™ regenerated cellulose fiber, part of a diverse range of business operations that included chemical fertilizer and viscose rayon. As industry modernized and the economy of Japan achieved selfsustainable growth, our operations made important contributions to the stability of people’s lives.

From 1970

From 1950 In 1957 we began production of polystyrene, and in 1959 entered the synthetic fiber business. These were followed by the three new businesses of nylon fiber, synthetic rubber, and construction materials. In 1968 we began construction of a petrochemical complex in the Mizushima area of Kurashiki, Okayama, Japan, paving the way for our full-scale development of petrochemical operations. Our products during this period supported improvements in the quality of life during Japan’s high-growth period.

In 1972 we entered the homes business with the launch of the Hebel Haus™, and in 1974 we entered the medical device business with hollow-fiber membrane artificial kidneys. Our entry into the electronics business began with our launch of Hall elements (magnetic sensors) in 1980 and start of LSI manufacture in 1987. Our products continued to help make life more comfortable and convenient as society’s needs diversified.

The first Hebel Haus™ (Kamata model home park)

Saran Wrap™ launched in Japan in 1960 Part of the ammonia plant completed in 1923 (Nobeoka, Miyazaki, Japan)

Hollow-fiber membrane LSIs artificial kidneys

Naphtha cracker (Kurashiki, Okayama, Japan) The Bemberg™ plant which started operation in 1931 (Nobeoka, Miyazaki, Japan)

Foods

Portfolio transformation

Chemicals

56 million

¥

Others Fibers

Fiscal 1980 Net sales

Fiscal 1960

Fiscal 1940 Net sales

Fibers

Foods and Fermentation Chemistry Construction Materials Homes

Net sales

¥

¥

44.9 billion

800.1 billion

Chemicals

Establishing the basis for modern life • Development of chemical industry and modern agriculture • Interbellum economic downturn and World War II

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Asahi Kasei Report 2017

Sufficiency of daily necessities, improvement in quality of homes, development of public infrastructure • Post-war recovery and modernization of industry • Period of high economic growth

• Stable economic growth • Economic bubble

We are Creating for Tomorrow, providing new value to society by enabling living in health and comfort and harmony with the natural environment

From 2010 Under the “For Tomorrow 2015” management initiative which began in 2011, we proactively expanded our operations through major acquisitions. In 2012 we entered the acute critical care business by acquiring ZOLL Medical Corporation, and in 2015 we acquired battery separator manufacturer Polypore International, LP. The current management initiative “Cs for Tomorrow 2018” is focused on expanding operations by heightening the combined strength of the Asahi Kasei Group.

From 1990 In 1992 we acquired Toyo Jozo Co., Ltd. to reinforce pharmaceutical operations. From 1999, we executed a program to heighten selectivity and focus in operations, divesting our food business and closing some fiber businesses, achieving selective diversification. From 2000 onward, we also established many overseas operations, mainly in Asia, laying the foundation for global management.

1922–

2016

The LifeVest™ wearable defibrillator

Pharmaceuticals just after the Toyo Jozo merger

Celgard™ Li-ion battery separator of Polypore

Asahi Kasei Electronics Materials (Suzhou) Co., Ltd., a major manufacturing base for photosensitive dry film

Critical Care

Others

Fibers

Health Care Others Health Care

Fibers

Construction Materials

Fiscal 2016 Net sales

Electronics

Fiscal 2000

Construction Materials

¥

Net sales

1,269.4 billion

1,883.0 billion

¥

Chemicals

Homes Homes

Chemicals

Increased comfort and convenience • Two decades of meager growth after collapse of bubble • Effect of global economic crisis

Electronics

Heightened environmental consciousness • Changing values after the Great East Japan Earthquake • Emergence from period of slow economic growth

Asahi Kasei Report 2017

17

Feature 1: Process of Creating Value in the Asahi Kasei Group

Creating for Tomorrow The employee

The community Community outreach

Environmental protection

Employee fulfillment

The customer Customer satisfaction

Society of clean environmental energy

The environment

Sustainable Increase in Corporate Value The supplier

The local economy

Fair business dealings

Local economic participation

Business operations

Pursuit of growth and profitability

Creation of new businesses

The shareholder Shareholder returns

Society of healthy/comfortable longevity with peace of mind

Acceleration of globalization

“Cs for Tomorrow 2018” strategic management initiative

CSR in Action CSR Fundamentals Compliance, Responsible Care, Corporate Citizenship, Respect for Employee Individuality

Group Mission

Contributing to life and living for people around the world

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Asahi Kasei Report 2017

The Asahi Kasei Group constantly aims to increase corporate value

Creating for Tomorrow The commitment of the Asahi Kasei Group: To do all that we can in every era to help the people of the world make the most of life and attain fulfillment in living. Since our founding, we have always been deeply committed to contributing to the development of society, boldly anticipating the emergence of new needs. This is what we mean by “Creating for Tomorrow.”

Providing value ▶P.20 Value Provided by the Asahi Kasei Group

We contribute to solutions to two important challenges faced by society, “clean environmental energy” and “healthy/comfortable longevity,” through our diversified businesses. The environment Management Greater importance of transparency and CSR

Shift to sustainable society; tightening environmental regulations

Society of clean environmental energy

Healthcare Expansion of global healthcare markets

IT Spread of IoT and other IT advances

Society of healthy/comfortable longevity with peace of mind

Energy Increasing energy demand; diversification of supply

Business activity ▶P.42 Operating Segments

Demographic change

Social economy

Increasing world population; aging population in developed countries

Increasing globalization; growing geopolitical risks

Food Growing food demand

Focused on the three basic strategies of “pursuit of growth and profitability,” ”creation of new businesses,” and “acceleration of globalization,” we are strengthening high value-added businesses to create new value for people in the world.

Basic strategy

Focus of CT 2018

Advancing toward 2025

Pursuit of growth and profitability

Creation of new businesses

Acceleration of globalization

Building the base for the next phase with connections among diverse businesses and diverse human resources

Creating a portfolio of high-profitability, high value-added businesses

Asahi Kasei Report 2017

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Feature 2: Value Provided by the Asahi Kasei Group

Our Group Vision is to provide new value to society by enabling “living in health and comfort” and “harmony with the natural environment” in accordance with our Group Mission of contributing to life and living for people around the world. The Hall element is a notable example of a product that illustrates how Asahi Kasei has created value from the past to the present, and how we will continue to create value in the future.

Hall element The Hall element is a highly sensitive magnetic sensor made with a thin film of semiconductor material. The Hall element works by utilizing the Hall effect, in which magnetic fields cause change in voltage. With high sensitivity, Hall elements from Asahi Kasei can detect magnetic flux density and orientation. A broad range of applications include contactless switches in combination with magnets, angle sensors, and current sensors. Geomagnetic sensors using Hall elements have also been commercialized, and are widely used in smartphones. Asahi Kasei started mass production of Hall elements in 1975 and met various evolving needs of society over the following four decades by continuously developing new applications to create new value.

Applications Electric motors The Hall element contributed to the commercialization of ultra-small brushless DC motors. Advantages include longer service life by eliminating the friction and wear of brushes, suppression of electromagnetic noise, higher drive efficiency, and lower power consumption. Applications have included electronic products such as VCRs and computers, appliances such as refrigerators and washing machines, and automotive components.

Computers Appliances VCRs

CD drive Development of Hall element starts for collision sensor

Components using Hall element

(originally part of airbag system)

1970

1975

Hall element breakthrough timeline

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Asahi Kasei Report 2017

1980

Thin-film technology Launch of development

Electric motor

1985

1990

Hall IC Entry to LSI business, advancing to next stage

80%

global share of cumulative production volume (FY2016)

Smartphones

Energy-efficient appliances Vehicle components Electronic compass Rotating axis Power window

CPU cooling fan

The electronic compass was developed by combining Hall elements, LSIs to amplify the sensor signals, and signal-processing software algorithms.

DVD player

1995

2000

Rotational angle sensor Generating new demand

2005

2010

2015

Electronic compass Magnetic convergence plate technology

Asahi Kasei Report 2017

21

Feature 2: Value Provided by the Asahi Kasei Group

Notable Example of Value Creation—The Electronic Compass Our invention of the electronic compass was achieved by combining technology for magnetic sensors to measure geomagnetism with our LSI and software technology. The electronic compass significantly enhanced the functionality of mobile phones and smartphones, enriching the experience of map applications such as pedestrian navigation systems and contributing to their widespread popularity.

About the electronic compass

The outset

The electronic compass, a semiconductor device that determines azimuth by measuring geomagnetism, is widely utilized for map applications installed in smartphones such as pedestrian navigation systems. Asahi Kasei developed the electronic compass by combining our technology for magnetic sensors, LSI technology to amplify the sensor signals, and signal-processing software algorithms. Asahi Kasei has earned a dominant share of the global electronic compass market.

Around 2000, when GPS was becoming a standard feature in mobile phones, we anticipated that there would be demand for pedestrian navigation systems similar to vehicle navigation systems. Unlike vehicle speed, however, walking is too slow to enable the direction of movement to be determined from GPS. Realizing that an electronic compass would be required to determine azimuth by measuring geomagnetism, we initiated its development.

Magnetic North Pole Geographic North Pole Horizontal = component Geomagnetism

Standard of azimuth

Vertical component

Equator

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Asahi Kasei’s advantage for development

Competitive strength

Our development of the electronic compass was not oriented as an effort to find a new outlet for a succession of our technologies starting from sensors and followed by LSIs. Rather, we first identified a market need and then took stock of our range of existing technologies, including sensors, LSIs, other constituent technologies, and manufacturing technology, and considered how to apply them in the development. We also leveraged our established business connections to ascertain customer needs from the early stages of development, and made many proposals. In addition to the advantage gained from each of these aspects, our true strength was the ability to combine all of them together in a new business model culminating in the electronic compass.

While other companies focused on the development of sensors with high sensitivity, which was costly and time-consuming, Asahi Kasei already had an established mass-production infrastructure for magnetic sensors as well as signalamplifying technology and distribution channels in its LSI business. Instead of aiming for high sensitivity, we sought to swiftly make an available product that provided utility to users. Our combination of technologies for sensors, LSIs, and algorithms enabled us to provide a solution to customers at low cost in a short time.

Asahi Kasei Report 2017

Creating Value for the Future Hall elements are poised for expanded use in the automobile field due to emerging trends for intensified application of electronic and control systems throughout the vehicle. The technology for Hall elements has also enabled the creation of infrared sensors which will meet growing demand in new fields such as human detecting sensors and gas sensors.

For automobiles

Infrared sensor

In addition to conventional applications in motor control for power steering, power windows, and air conditioner fans, demand for sensors in the power train is expected to grow in line with engine downsizing and an increasing number of gears in the transmission for improved fuel efficiency and compliance with environmental regulations. The development and spread of autonomous vehicle technology around the world will provide further impetus to strong demand growth for sensors in vehicles.

The infrared sensor was developed using thin-film semiconductor technology cultivated in the magnetic sensor business. It can be used to detect human presence in homes and other indoor environments. It also has great potential for use as a gas sensor in systems to heat and cool buildings. Especially in high-rise office buildings and in wellsealed homes, the efficiency of heating and cooling is highly dependent on the amount of outside air drawn in. By measuring indoor CO2 concentration, a gas sensor can enable the minimum necessary ventilation while maintaining a comfortable indoor temperature, resulting in a significantly reduced energy requirement.

Hall elements contributing to reduced CO2 emissions Under the “Cs for Tomorrow 2018” medium-term management initiative, Asahi Kasei aims to contribute to solutions for “clean environmental energy” through our diverse businesses. As magnetic sensors, Hall elements play an important role in saving energy. Electric motors are used in every kind of home appliance. By accurately detecting rotation position and speed, magnetic sensors enable the motors to run with the minimum amount of electricity, resulting in reduction of CO2 emission from power generation. We certified Hall ICs and Hall elements for air conditioner DC motors as global warming conscious products in accordance with our original guidelines. Our business activities with these products will make an ongoing contribution to the environment.

Asahi Kasei Report 2017

23

Directors

1. Chairman & Director

Ichiro Itoh

Hideki Kobori

After many years of experience in the fibers business, he held several leadership positions including executive officer for planning, accounting, and finance, and vice-presidential executive officer. He has been Chairman & Director since April 2010. He possesses a wealth of experience and a broad range of knowledge on the Asahi Kasei Group’s businesses and corporate management.

After many years of experience in the electronics business, including as President & Representative Director of Asahi Kasei Microdevices Corp., he oversaw strategy, accounting, finance, and internal control. He assumed the role of President of Asahi Kasei in April 2016. He possesses a wealth of experience and a broad range of knowledge on the Asahi Kasei Group’s businesses and corporate management.

5. Director Lead Executive Officer

6. D  irector Lead Executive Officer

Nobuyuki Kakizawa

After many years of experience in the housing businesses, he held several leadership positions including Assistant Senior General Manager of Accounting and Finance at Asahi Kasei Corp. and General Manager of General Affairs at Asahi Kasei Homes Corp. He became General Manager of General Affairs in April 2013 with responsibility for formulating and executing measures for risk management and compliance of the Asahi Kasei Group. He possesses a wealth of experience and a broad range of knowledge on risk management and compliance.

9. Outside Director

Asahi Kasei Report 2017

Soichiro Hashizume

After many years of experience in human resources, he held several leadership positions including President of PTT Asahi Chemical Company Limited. He has been responsible for human resources development and the planning and execution of personnel and labor measures of the Asahi Kasei Group since April 2013. He possesses a wealth of experience and a broad range of knowledge on human resources.

Tsuneyoshi Tatsuoka

With his wealth of experience and broad range of insight into industrial and economic policy, including as administrative vice-minister of the Ministry of Economy, Trade and Industry, he fulfills his role as Outside Director in deciding on important matters of the Asahi Kasei Group as well as overseeing business execution.

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2. President & Representative Director Presidential Executive Officer

9

8

7

1

2

3

4

5

6

3. Representative Director Vice-Presidential Executive Officer

Masafumi Nakao

After many years of experience in R&D and new business development in the electronics business, he held several leadership roles including General Manager of the R&D Center and executive officer for quality assurance at Asahi Kasei Microdevices Corp. Since April 2012, he has overseen R&D of the Asahi Kasei Group. He possesses a wealth of experience and a broad range of knowledge on R&D.

7. Outside Director

Norio Ichino

With his wealth of business management experience and broad range of insight as a corporate executive, including as President of Tokyo Gas Co., Ltd., he fulfills his role as Outside Director in deciding on important matters of the Asahi Kasei Group as well as overseeing business execution.

4. D  irector Senior Executive Officer

Shuichi Sakamoto

After many years of experience in the petrochemical business, he became General Manager of Corporate Strategy in November 2014 with responsibility for formulating and executing the management strategy and business strategies of the Asahi Kasei Group. Since April 2016, he has overseen accounting, finance, and IT. He possesses a wealth of experience and a broad range of knowledge on the Asahi Kasei Group’s businesses and corporate management.

8. Outside Director

Masumi Shiraishi

With her wealth of experience and broad range of insight into economics and society, including as a professor at Kansai University, she fulfills her role as Outside Director in deciding on important matters of the Asahi Kasei Group as well as overseeing business execution.

Asahi Kasei Report 2017

25

Corporate Governance

1

Basic Views on Corporate Governance the longer term by promoting innovation and creating synergy through integration of various businesses. We continue to pursue the optimal corporate governance as a framework to make transparent, fair, timely, and resolute decisions in accordance with changes in the business environment.

The Group Vision of Asahi Kasei is to provide new value to society and solve social issues by enabling “living in health and comfort” and “harmony with the natural environment” under the Group Mission of “contributing to life and living for people around the world.” With this as a base, we aim to contribute to society, achieve sustainable growth, and enhance corporate value over

2

Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management (as of June 28, 2017) Shareholders Meeting Election

Election

Audit

Oversight

Board of Corporate Auditors

Board of Directors

(5 Corporate Auditors, including 3 Independent Outside Corporate Auditors)

(9 Directors, including 3 Independent Outside Directors)

Cooperation

Nomination Advisory Committee Remuneration Advisory Committee

Audit

Independent Auditors

Audit

Oversight

Execution of operations

Management Council

Risk Management & Compliance Committee

President

Compliance Hotline

Responsible Care Committee

Internal Audit Department Group staff functions Core Operating Companies, Strategic Business Units

3

Corporate Governance System

Oversight and audit The Board of Directors, which consists of nine Directors including three independent Outside Directors (one-third), makes decisions on matters requiring a Board of Directors resolution in accordance with laws or the Articles of Incorporation, makes decisions on important matters for Asahi Kasei Corp. and other companies of

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Asahi Kasei Report 2017

the Group, and oversees execution of operations by Directors and Executive Officers. The newly established Nomination Advisory Committee and Remuneration Advisory Committee under the Board of Directors consist primarily of Outside Directors who provide active involvement in the consideration of matters such as: optimal makeup

and size of the Board of Directors, policy regarding nomination of candidates for Directors and Corporate Auditors, criteria on the independence of Outside Directors and Outside Corporate Auditors, remuneration policy and system for Directors, and evaluation of individual Directors to determine remuneration based on performance. The Board of Corporate Auditors consists of five Corporate Auditors including three independent Outside Corporate Auditors (a majority). In accordance with the audit policy stipulated by the Board of Corporate Auditors, each Corporate Auditor oversees execution of duties by Directors by attending the Board of Directors meetings and examining the state of operations. To enhance functions of the Board of Corporate Auditors and to facilitate smooth cooperation among Corporate Auditors from inside the company and Outside Corporate Auditors, a Corporate Auditors Office is staffed with full-time employees. PricewaterhouseCoopers Aarata LLC performs financial audits based on the Companies Act and the Financial Instruments and Exchange Act.

4

Execution of operation We have adopted an Executive Officer system to enable faster business execution, and clearly define responsibilities; Directors fulfill decision-making and oversight functions, and Executive Officers fulfill execution of operations. The Decision-making and Approval Authority Regulations of the Asahi Kasei Group stipulate detailed criteria for decisionmaking with regard to matters concerning the management plan, investments and loans, funding and financial management, organization and management system, research and development, and production technology, and delegate authority from the Board of Directors to the Management Council, strategic business units, and core operating companies.

Policy and Procedure to Nominate Candidates for Directors

In selecting candidates for Directors, we appoint persons with deep insight and excellent skills suitable for the role. For Directors from inside the company, we select those with expertise, experience and skills required in the respective field. On the other hand, Outside Directors are expected to supervise the management from an objective standpoint based on their deep insights and rich experience. Therefore we select from among people who

5

Furthermore, the Internal Audit Department conducts internal audits based on the audit plan. Results of internal audits performed by each group staff function are aggregated by the Internal Audit Department and reported to the Board of Directors.

were corporate executives, academic experts, or public officials. To further heighten objectivity and transparency in appointing candidates for Directors, we established a Nomination Advisory Committee which consists primarily of Outside Directors who take part in discussions of the makeup and size of the Board of Directors and policies for nomination of Directors and Corporate Auditors, and provide advice to the Board of Directors.

Policy and Procedure to Determine Remuneration of Directors

Directors’ remuneration consists of fixed base remuneration, performance-linked remuneration, and stock-based remuneration. The monetary amount and number of stocks are determined based on the remuneration system approved in advance by the Board of Directors, within the limits approved at a shareholders meeting. Fixed base remuneration provides specific amounts in accordance with the rank of each Director. Performance-linked remuneration is based on consolidated financial results and individual performance evaluation. Performance is comprehensively evaluated in consideration of the degree of achievement of individually established objectives, achievements, contributions to financial performance, and the degree of contributions, in addition to management benchmarks such as net sales, operating income, and ROA. The stock-based remuneration system is designed to reward

current effort with compensation reflecting future share prices by granting the shares at the time of each individual’s retirement from any position of officer of the Asahi Kasei Group, with the number of shares to be granted being determined in accordance with each Director’s rank. Remuneration for Outside Directors, however, is comprised solely of fixed base remuneration. We determine the level of remuneration based on research data provided by external specialized agencies, etc. In order to further improve objectivity and transparency of Directors’ remuneration, we have established a Remuneration Advisory Committee, which consists primarily of Outside Directors, who participate in discussions about the Directors’ remuneration system and operation thereof, and provide advice to the Board of Directors.

Asahi Kasei Report 2017

27

Corporate Governance

6

Independence Standards and Qualification for Outside Directors and Outside Corporate Auditors

In determining that Outside Directors and Outside Corporate Auditors are independent, we ensure that they do not correspond to any of the following and whether they are capable of performing duties from a fair and neutral standpoint. 1. Person who currently executes or has executed businesses of the Asahi Kasei Group (executive directors, executive officers, employees, etc.) over the last 10 years 2. Company or person who executes businesses thereof whose major business partner is the Asahi Kasei Group (company with more than 2% of its annual consolidated net sales from the Asahi Kasei Group) 3. Major business partner of the Asahi Kasei Group (when payments by this partner to the Asahi Kasei Group account for more than 2% of our annual consolidated net sales or when we borrow money from such partner amounting to more than 2% of our consolidated total assets) or person who executes businesses thereof 4. Person who receives money or other financial gain (¥10 million or more in a year) from the Asahi Kasei Group as an individual other than remuneration as a Director or Corporate Auditor of Asahi Kasei

7

6. M  ain shareholder of the Asahi Kasei Group (person or company who directly or indirectly owns 10% or more of all voting rights in Asahi Kasei) or person who executes businesses thereof 7. P  erson who executes businesses of a company which elects Directors, Corporate Auditors, or employees of the Asahi Kasei Group as its own Directors or Corporate Auditors 8. Independent Auditors of the Asahi Kasei Group or any staff thereof 9. P  erson who fell into any of the categories 2 through 8 above over the last three years 10. Person who has a close relative (spouse, relative within the second degree of kinship, and those who share living expenses) who falls under any of the categories 1 through 8 above, provided that “person who executes businesses thereof” in 1, 2, 3, 5, 6, and 7 above shall be replaced with “important person who executes businesses thereof (executive directors, executive officers, etc.)”

Audits

In accordance with the audit policy adopted by the Board of Corporate Auditors, each Corporate Auditor attends meetings of the Board of Directors and audits Directors in the discharge of their duties through examination of business performance. The Corporate Auditors Office provides staff to support Corporate Auditors in their duties. PricewaterhouseCoopers Aarata LLC is contracted as the Independent Auditors to perform financial audits in accordance with the Companies Act and Financial Instruments and Exchange Act. The Independent Auditors form a team of assistants for

28

5. C  ompany which receives donation or aid (¥10 million or more in a year) from the Asahi Kasei Group or person who executes businesses thereof

Asahi Kasei Report 2017

performance of the audit in accordance with its audit plan, comprising 17 certified public accountants and 34 other specialist accountants. The Internal Audit Dept., the Board of Corporate Auditors, and the Corporate Auditors of core operating companies and other subsidiaries regularly meet to confirm the effectiveness of internal governance systems for legal compliance and risk management. The Board of Corporate Auditors provides counsel to the Independent Auditors of the consolidated financial audit of Asahi Kasei each quarter and each fiscal year.

Corporate Governance

Feature

The effectiveness of our Board of Directors is regularly evaluated after each fiscal year, and results of evaluation are disclosed.

1. Measures implemented in fiscal 2016 The Board of Directors implemented the following measures in fiscal 2016 based on evaluation of the previous fiscal year.

1) Change of agendas for Board of Directors meetings In order to enhance the supervisory functions of the Board of Directors, the agendas for Board of Directors meetings were reviewed in order to place greater focus on discussions of corporate governance, risk management, and compliance. After several discussions at the meetings, the new Asahi Kasei Group Code of Conduct was established and became available on the Asahi Kasei website in April 2017.

2) Proposal for adoption of a stock-based remuneration system By more clearly linking remuneration of Directors and Asahi Kasei’s shareholder value, a new system was proposed to reinforce the common interest between Directors and shareholders, including both the benefits and risks associated with variations in the share price. The system is designed to enhance the motivation

of Directors to contribute to greater business performance and corporate value of Asahi Kasei over the longer term. For the purposes above, we proposed the introduction of a stock-based remuneration system at the 126th Ordinary General Meeting of Shareholders, and approval was received. To ensure objectivity and transparency, the proposal for adopting the system was deliberated at the Remuneration Advisory Committee consisting primarily of Outside Directors.

3) Enhanced provision of information to Outside Directors and Outside Corporate Auditors As part of our effort to expand the provision of information to Outside Directors and Outside Corporate Auditors, we held tours of our sites for Outside Directors and Outside Corporate Auditors to help them gain a deeper understanding of our operations. In addition to holding such site visits on an annual basis, we provide regular explanations by people responsible for each business unit in order for Outside Directors and Outside Corporate Auditors to keep abreast of the current business situation and issues.

2. Moving forward Through the measures described above, we believe that we have enhanced the supervisory functions of the Board of Directors. Based on deliberations of the effectiveness of the Board of Directors during fiscal 2016, we will continue and expand these efforts in the future. We also plan to develop discussions during fiscal 2017 on the longer-term direction of management strategies, the progress of the medium-term management initiative, and IR activities, as well as the opinions of investors and trends of

capital markets. There is an increasing need for the Asahi Kasei Group to conduct management from a global perspective through largescale M&A and overseas business development, and the business environment is rapidly changing. In line with such changes in the environment, we recognize the need to flexibly adapt the membership and the structure of the Board of Directors in the future.

Greater diversity of Directors is needed for growth over the longer term I feel that the current operation of the Board of Directors is generally appropriate. Outside Directors have diverse backgrounds, including in corporate management, industrial policy, and academia, and independence is maintained. Directors are given ample time to consider proposals in accordance with their content, and the frequency of Board meetings is appropriate. Discussions among Directors are uninhibited and lively, and frank opinions are exchanged. Nevertheless, viewed from a longer-term perspective, there are outstanding issues concerning the composition of Directors. If we are to have a broader range of business strategies, including for future M&A and global development, I think we need to bring in more people having backgrounds in technology, women from within the company, and younger people as Directors. I believe this is important for the longer-term development of Asahi Kasei, and I will continue to clearly express my thoughts on the matter.

Masumi Shiraishi Outside Director

Asahi Kasei Report 2017

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Specific Measures to Heighten Compliance

“Compliance,” “Communication,” and “Challenge” are identified as areas of emphasis under our Cs for Tomorrow 2018 management initiative. To heighten awareness for compliance among personnel, we are focusing on the “three actuals” of the actual place, actual thing, and actual fact. We believe that the trust of society is earned by having employees go to the actual place in person, see the actual thing with their own eyes, and know the actual facts.

Basic principles The Asahi Kasei Group takes compliance seriously, and fully adheres to laws and regulations that are applicable to each business and function, as well as internal company rules. Each employee is also expected to uphold high ethical standards and respect social norms throughout the course of business activities.

Actions during the past year Enhanced framework for risk management and compliance Enactment of Asahi Kasei Group Basic Regulation for Risk Management & Compliance

Establishment and composition of Risk Management & Compliance Committee

We newly enacted the Asahi Kasei Group Basic Regulation for Risk Management & Compliance to clearly specify basic systems and organizations for the central aggregation and administration of all matters related to risk management and compliance.

Our previous Corporate Ethics Committee and Risk Management Committee were combined into a new Risk Management & Compliance Committee chaired by the President of Asahi Kasei Corp. The new committee monitors the management of risks and the state of compliance throughout the Asahi Kasei Group.

Outline of Asahi Kasei Group Basic Regulation for Risk Management & Compliance

Framework for risk management & compliance Board of Directors, Management Council

1. Purpose of the regulation 2. Definition of terms for risk management & compliance 3. Scope of application of the regulation 4. Framework for risk management & compliance 1) Designation of Executive Officer for Risk Management & Compliance

Reporting

Deliberation/decision

Risk Management & Compliance Committee

2) Establishment and composition of Risk Management & Compliance Committee

(Risk Management & Compliance Oversight Department)

Administrative departments

(Risk Management & Compliance Promotion Departments)

4) Role of Presidents of SBUs and core operating companies

5. The Asahi Kasei Group Code of Conduct

Risk Management & Compliance, General Affairs Coordination

3) Establishment of Risk Management & Compliance Oversight Department/Risk Management & Compliance Promotion Departments 5) Designation and role of Risk Management & Compliance Supervisors/Risk Management & Compliance Managers

(Secretariat)

Instructions/reports

Business units

Strategic Business Units

Core Operating Companies

Subsidiaries (worldwide)

Subsidiaries (worldwide)

6. Crisis response 7. Internal reporting system

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Asahi Kasei Report 2017

Formulation of compliance policy, heightening awareness Establishment of new Asahi Kasei Group Code of Conduct

Efforts for heightened awareness at each workplace

For greater ease of understanding among our personnel around the world, we fundamentally reviewed the content of our former “Corporate Ethics—Basic Policy and Code of Conduct” and adopted a new “Asahi Kasei Group Code of Conduct” which is applied throughout all companies of the Asahi Kasei Group. In fiscal 2017 we distributed a booklet on the new code of conduct to all employees in Japan, and disclosed the code of conduct on our public website. (Measures to gain understanding and familiarity with the Asahi Kasei Group Code of Conduct among subsidiaries and affiliates located outside Japan are scheduled to be performed henceforth.)

Each workplace in Japan is holding training sessions to review the content of the Asahi Kasei Group Code of Conduct. To support the consistent and effective implementation of these training sessions, we prepared several case studies for employees to easily understand how elements of the code of conduct relate to realworld situations, as well as a supplementary reader that explains the content of the code of conduct, with cartoon illustrations.

Outline of the Asahi Kasei Group Code of Conduct

Case studies

1. E nsuring Safety, Environmental Protection, and High Quality to Contribute to Life and Living

1. Reporting, informing, and/or discussing as fundamental to ensuring thorough safety

(1) Maintaining Thorough Safety in All Aspects

2. What is the first thing you think of when putting priority on the safety and health of customers?

(2) P  rovision of Safe and High-Quality Products and Services that Customers Can Rely On

3. Health management at the workplace

(3) T horough Management of Workplace Safety, Ensuring Safe and Comfortable Workplace Environments

4. Environmental standards that were acceptable in the past, but...

(4) E nvironmental Protection and Harmony with Local Communities

6. 1) Even if good data is obtained... 2) Although sales are important...

2. Maintaining Sincere Relationships with Various Related Parties around Us

7. Even when the company doesn’t give you instructions...

(5) Timely and Appropriate Disclosure of Information to Society (6) Appropriate Descriptions to Customers, Provision of Safe and Reliable Products and Services (7) H  ealthy Relationships with Customers and Government Officials

5. Dealing with sudden media inquiries

8. At social gatherings of industry associations... 9. 1) What is optimal procurement? 2) Offers of gifts from suppliers 10. When enthusiastic instruction may seem dehumanizing... 11. Beware of overdependence on certain individuals!

(8) Fair Relationships with Competitors

12. 1) Discretion when speaking in the elevator! 2) Caution when writing in blogs or SNS

(9) O  ptimized Procurement and Healthy and Appropriate Relationships with Suppliers

13. 1) Be wary of e-mail from unknown parties! 2) Carelessness with customer information

(10) Respect for Human Rights and Diversity

14. Carelessness with technological information

3. Utilizing Management Assets Appropriately and Effectively

15. Conduct with integrity (part 1) Conduct with integrity (part 2)

(11) Performing Work with Integrity and Responsibility (12) Compliance with Accounting and Tax Rules, Protecting Company Property (13) Protecting and Managing Information (14) Protecting and Respecting Intellectual Property Rights (15) Compliance with Laws and Regulations, Practicing Corporate Ethics

The Asahi Kasei Group Code of Conduct is available at the following address: www.asahi-kasei.co.jp/asahi/en/csr/compliance/about_compliance/pdf/about_compliance_01.pdf

Asahi Kasei Report 2017

31

Specific Measures to Heighten Compliance

Cartoon illustrations of case study examples

Measures for risk management Reviews to identify latent risks in each business unit Managers responsible for risk management and compliance are designated in each SBU, core operating company, and subsidiary, and work to assess and analyze their related risks and to plan and implement measures to mitigate serious risks. Through the Risk Management & Compliance Committee, we confirm and followup on the state of risk management in each business unit.

Measures applied throughout the Asahi Kasei Group Prevention of bribery: To prevent the occurrence of any act which would constitute bribery, we newly enacted Asahi Kasei Group Policies for Prevention of Bribery, including basic policies to prohibit bribery and clear procedures to follow to reduce briberyrelated risks.

32

Asahi Kasei Report 2017

Protection of personal information: In conformity with the May 2017 amendment of Japan’s Act on the Protection of Personal Information, we revised the Asahi Kasei Group Regulation for Management of Personal Information as necessary. Related departments were informed of the changes and new measures required. Prevention of insider trading: In March 2017, an employee of a subsidiary was fined by Japan’s Financial Services Agency for insider trading. Taking this matter very seriously, we revised the Asahi Kasei Group Regulation for Prevention of Insider Trading to prevent any recurrence. Since July 2017, the revised regulation requires advance notification of share trading by employees, and prohibits share trading by employees prior to earnings announcements.

Feature 3: Global Executives Interviews

Asahi Kasei acquired acute critical care device manufacturer ZOLL in 2012 and battery separator manufacturer Polypore in 2015 for a combined total of some $4.4 billion. While ZOLL retained its management team after the acquisition, new leadership was installed at Polypore. In these interviews, leaders of the two companies share their thoughts on the PMI process and other management challenges.

ZOLL

Richard Packer Chairman, Board Director, ZOLL Medical Corporation Primary Executive Officer, Asahi Kasei Corp.

How do you evaluate the post-merger integration (PMI) process between Asahi Kasei and ZOLL? The process of PMI went smoothly, I think mostly because of the flexibility that Asahi Kasei showed. ZOLL and Asahi Kasei have very different kinds of business, so we had to learn a lot about one another’s ways of working. Asahi Kasei’s PMI team really allowed the ZOLL people to help define what would work for ZOLL in the long term for continuous growth. It’s a good example of what I found to be the Japanese way of making a plan after first scrutinizing conditions; different from the American way of taking action first and thinking about it later. Compensation was another area where Asahi Kasei showed flexibility. Knowing there are big differences between the American and Japanese systems, Asahi Kasei contracted an American compensation consulting firm to analyze what kind of incentives would be best for ZOLL. The firm concluded that in order to achieve retention, ZOLL people should be compensated in a different manner. But I told Asahi Kasei it wasn’t necessary. ZOLL already had an effective compensation system that kept people satisfied, with a low turnover rate. Asahi Kasei flexibly adopted our opinion and trusted us more than the consulting firm, and the result was excellent. When it comes to flexibility, I believe we owe a lot to the leadership of Fujiwara-san, the President of Asahi Kasei at the time. He and I had many discussions about how to integrate our companies. He always said that the key to success would be to retain the ZOLL people, since Asahi Kasei couldn’t grow the business without them. I really appreciate his vision, giving us flexibility to manage the business after the merger as well.

Asahi Kasei Report 2017

33

Feature 3: Global Executives Interviews

Did you find any shortcomings of Asahi Kasei? In my view, some top management people may not really want to take bold actions for growth. They tend to seek stability. I believe that seeking growth provides greater potential to increase business opportunities, and ZOLL is always doing so. Like most American companies, we don’t want to just be stable. The younger people in Asahi Kasei understand the need for growth and are eager for it, but some of the senior people don’t give me that impression. I’m not saying we should always take high risks aiming for high rewards. The point is striking a balance between risk and reward. It’s good to gain a degree of stability by having diversified operations, but we can’t expect any growth at all without taking any risk.

Why do you think some senior people place too much emphasis on stability?

Packer together with Taketsugu Fujiwara, President of Asahi Kasei at the time of the acquisition in 2012

34

Asahi Kasei Report 2017

It may because of the Japanese system of lifetime employment and seniority. This functioned very well during the period of high growth until the 1990s. But past success can be an impediment to change. In effect, younger people are prevented from getting into positions of responsibility early in their career. If people don’t join the management ranks until they are near retirement, it’s natural that they would tend to value stability. They don’t want to hurt the business during their tenure, and they can’t expect to stay long enough to follow through on something new. If people joined the management ranks at a younger age, knowing they had 10 or 20 years ahead of them, they would be more ambitious in taking risks to expand their business. When I took responsibility for ZOLL, I was the youngest of the top executives; others were more than 10 years older than I. I looked for ways to grow the business, knowing the risks entailed, but I knew I had years ahead of me to make it work if I made a mistake. In the United States, we have a way to fast-track young personnel, moving younger people into management earlier and giving them responsibility for growing their business. I know this may cause friction because some people are skipped over, and some younger people receive more compensation than their seniors. But I believe that it is important to utilize talented young people this way. A diversity in age is also beneficial because the more experienced people can serve as mentors to the younger leaders, and they can reinforce one another effectively.

You said growth creates opportunities. What is needed for Asahi Kasei to grow more? I think growth provides opportunities and solves various problems. Having worked at Asahi Kasei for five years, I really appreciate our corporate culture, I know we have outstanding people, and I understand how much they care about the company. Also, I have seen that we can be very flexible. So I think we already have the foundation for further success, but that alone is not enough. We need to build on that foundation by utilizing not only people of various ages but also local people in various locations. By flexibly utilizing a more diverse range of people, Asahi Kasei can build on its strengths toward further growth. I believe this can also establish Asahi Kasei’s competitive advantage ahead of other Japanese companies in the midst of globalization. In that sense, utilizing diversity of personnel becomes all the more important. Looking back on the 25 years I’ve been involved in the management of ZOLL, we have always utilized people of various nationalities. We leverage local people in the management of our operations around the world. For example, a German person runs our business in Germany, and a British person runs our British business. We deliberately involve local people in the management at each location rather than sending an American person, and it has worked well for us. Unfortunately, we have not been as successful with diversity of gender, as we do not have enough women in high executive positions. We need to do better in this area.

Finally, could you tell us about the mission of the acute critical care business?

The LifeVest™ wearable defibrillator

I remember when I first met people from Asahi Kasei. They were fascinated by the mission of ZOLL. Here was this medical equipment that could save a life in danger, and a company that saw its mission as saving lives by providing the right products. On the other hand, I was fascinated by the fact that Asahi Kasei, a 100-year-old company with $20 billion in sales mainly in chemicals, had a mission of contributing to healthy living and longevity. You would rarely see that attitude in an American company. Asahi Kasei sincerely held protecting life to be one of its core values, which aligned perfectly with ZOLL’s aims. Our relationship was cemented by sharing the same mission. Since the merger, ZOLL’s growth has accelerated and our products save many more lives than before. Together with Asahi Kasei, ZOLL will continue to expand as we fulfill our unchanging mission of saving lives.

The ZOLL AED Plus™ automated external defibrillator

Asahi Kasei Report 2017

35

Feature 3: Global Executives Interviews

Polypore

What is the key to expanding your business? The operating environment for Polypore is changing very rapidly. As electric drive vehicles become more widespread, battery performance is improving tremendously. Performance requirements for battery separators are constantly on the rise. We need to meet these changes while maintaining high quality and stable supply. The key is adapting to rapid change. The management team must clearly discern the changes, and swiftly act accordingly.

What measures have you taken to adapt to changes?

Shigeki Takayama CEO, Polypore International, LP Senior Executive Officer, Asahi Kasei Corp.

During the post-merger integration (PMI) process, we overhauled the management team. After the acquisition, a new kind of leadership was required for Polypore. Previously, skillful explanation was required in order to raise funds from the capital markets. As part of Asahi Kasei, however, this became unnecessary. Rather, swift actions toward growth while integrating our businesses together and adapting to rapid changes became essential. The previous management team was ill suited to the new tasks. The eight members of the current team are a diverse group, including three women and several nationalities—Japanese, American, German, and Chinese. This team is nimble enough to adapt our strategy on a monthly basis, yet adhere firmly to a long-term growth perspective. It is also able to gain the understanding of personnel as we busily work toward further growth.

How do you evaluate the support you’ve received from Asahi Kasei?

Celgard™ lithium-ion battery separator

The battery separator business is probably the most dynamically changing business in Asahi Kasei. The company understands that. Investment decisions are made swiftly and flexibly with sufficient consideration for economics and safety. A delay in judgment would be devastating for this business. I am extremely grateful that Asahi Kasei acts promptly and appropriately to respond to changes in the operating environment and meet customer needs.

How do you keep personnel motivated in such a rapidly changing operating environment?

Takayama gives his first briefing to Polypore and Celgard employees after the acquisition

36

Asahi Kasei Report 2017

Maintaining employee motivation is absolutely vital. Among brain scientists, there is a theory that people naturally fear change, and to maintain a balance people also need an equivalent degree of stability. I feel that the company’s vision can serve as the needed source of stability. While people work hard every day on new developments and quality improvements to meet customer needs, the company’s vision remains an unchanging beacon to continuously strive toward. For example, consider Elon Musk, the CEO of Tesla. He is also CEO of SpaceX, which develops rockets. His vision is for the rockets to be used to move 50,000 people to Mars in the near future. I understand that a sense of urgency regarding the world’s energy issues and a grand vision are what motivate his employees. Polypore is also involved in solutions to the world’s energy challenges. I would like to craft a clear vision that enables all our employees to share the same aim. I also think it’s important to enjoy change. Sometimes it’s necessary to go beyond your own boundaries. In the United States, there tends to be clear recognition of personal

performance, and so boundaries of responsibility are clearly delineated. At Asahi Kasei, though, people often work beyond their boundaries. This is one aspect of taking on challenges, which is one of our Group Values. Motivation for work comes not only from monetary remuneration. Even in the United States, “fun” is recently seen as an important factor. If the company encourages people to proactively reach beyond their own area, we can foster a culture that values fun. I hope we can get Polypore personnel to begin doing this, and our management team is now advancing discussions on how to do so.

Globalization requires appropriate response to various changes. What do you consider to be important points?

At the opening ceremony of a new plant for Daramic™ in Gujarat, India

Daramic™ lead-acid battery separator

The first is to have high-level administrative functions such as legal, HR, and IT. Polypore operates globally, with manufacturing sites around the world. They have rich knowledge and experience in various regions. I think the Asahi Kasei Group would benefit from leveraging such functions. For instance, if one of our businesses is going into a region where Polypore is already operating, Polypore’s knowledge of legal procedures, HR systems, and IT infrastructure can be very helpful. Also, we have 10 group companies in the United States including ZOLL and Polypore. Polypore has a highly advanced IT infrastructure which could be used to support other operations as well. The second important point is hiring outstanding local personnel in each location. For example, when we built a new Daramic™ plant in India, an excellent local employee led the project for us. Everything went very smoothly. The local managers and engineers we’ve hired in each location are fluent in English and help us think hard about the business. Retaining highly capable local personnel is extremely important. Polypore has a global HR network, and is able to contact appropriate outside people as required. It would be valuable for the Asahi Kasei Group to make use of this function. Thirdly is outstanding communication. I have a telephone conference with around 100 global leaders every three months. In these quarterly conferences, I discuss the state of business, progress on achieving our budget, and what our challenges are. The participants have various nationalities and different native languages, so we try to make sure the documents are written in plain English. We are also careful about the sequence of the documents to be discussed. Arranging each conference requires careful coordination so as to avoid a time that falls on a holiday for any of the participants. We have a very capable communications team that arranges the conferences and prepares the documents. Effective communication is essential for smooth decision-making among our global leaders, and to advance the overall management of a global organization.

What is the significance of your business? Our business makes an important contribution to solutions to the world’s fossil-fuel challenges. We have the potential to reshape the history of energy. It is a wonderful business that employees can tell their families about with pride. I’d like to channel this into motivation to work diligently for the growth of the business. Put simply, our product is a polyolefin film. But as part of a battery, it is an essential component that ensures safety and performance. More and more electric drive vehicles are on the road. Soon there will be a million, then two million. Our product plays a vital role in ensuring the safety of those vehicles. We can never compromise on the safety and quality of our products. We will continue to contribute to a society of clean environmental energy, providing safety that no competitor can match as we create new value for society.

Asahi Kasei Report 2017

37

Financial and Non-Financial Highlights

2017

2016

2015

2014

¥1,882,991 1,226,633 656,358 159,229 160,633 157,388 115,000 138,979 82.34 90,573 91,387 79,566 24.00

¥1,940,914 1,261,203 679,711 165,203 161,370 146,389 91,754 (11,925) 65.69 99,000 93,811 81,118 20.00

¥1,986,405 1,313,128 673,277 157,933 166,543 158,440 105,652 214,484 75.62 89,108 86,058 75,540 19.00

¥1,897,766 1,289,054 608,712 143,347 142,865 163,860 101,296 146,102 72.48 92,397 86,052 71,101 17.00

For the years ended March 31

Net sales Domestic sales Overseas sales Operating income Ordinary income Income before income taxes Net income attributable to owners of the parent Comprehensive income Net income per share, yen Capital expenditure Depreciation and amortization R&D expenditures Cash dividends per share, yen

2017

2016

2015

2014

¥2,254,500 346,682 556,881 340,302 1,151,344 824.36 51.1 33,720

¥2,211,729 336,743 555,989 305,140 1,041,901 745.94 47.1 32,821

¥2,014,531 339,677 502,507 334,368 1,082,654 775.05 53.7 30,313

¥1,915,089 328,540 480,535 285,735 912,699 653.15 47.7 29,127

As of March 31

Total assets Inventories Property, plant and equipment Investments and other assets Net wortha Net worth per share, yen Net worth/total assets, % Number of employees a b

Net assets less non-controlling interests. In the year ended March 31, 2012, the accounting policy for naphtha resale was changed to exclude naphtha resale amount from net sales. This change is applied retroactively from the year ended March 31, 2008, through the year ended March 31, 2011.

Net sales1

Operating income2

(¥ billion)

(¥ billion)

2,000

1,666.6

1,500

1,897.8

1,986.4

1,940.9

250

1,883.0

200

143.3

150

1,000

100

'15

'16

92.0

-50

'12

'13

Fibers Health Care

Chemicals Critical Care

'14 Electronics Others

'15 Homes

'16

'12

(FY)

Construction Materials

Fibers Health Care

'13 Chemicals Critical Care

Net income attributable to owners of the parent, ROE (¥ billion)

120

101.3

100

105.7

115.0 91.8

80

53.7

(%)

(¥ billion)

24

500

20

400

12

11.7

7.1

20

10.5

10.6

8.6

0

'12

'13

'14

Net income attributable to owners of the parent (left scale)

'15

'16

8

(FY)

Homes Construction Materials Corporate expenses and eliminations, etc.

449.7 381.4 303.9

300 200

4

100

0

0

0.47

ROE (right scale)

0.8 0.6

269.0 0.43

0.33 '13

Interest-bearing debt (left scale) 2

1.0

402.8

0.35

0.25

0.4 0.2 0

'12

(FY)

In FY2016, the four segments of Chemicals & Fibers, Homes & Construction Materials, Electronics, and Health Care were changed to the three segments of Material, Homes, and Health Care. Some businesses were reclassified among segments at the same time. For comparison, FY2015 results have been recalculated according to the new classifications. Asahi Kasei Report 2017

'14 Electronics Others

Interest-bearing debt, D/E ratio

16

40

38

159.2

0

0

1

165.2

50

500

60

157.9

'14

'15

'16

D/E ratio (right scale)

 mortization of goodwill, etc., related to acquisition of ZOLL and Polypore are A excluded from Critical Care and Electronics, respectively, and included in “Corporate expenses and eliminations, etc.”

(FY)

Millions of yen, except where noted

2013

2012

2011b

2010b

2009b

2008b

2007

¥1,666,640 1,181,429 485,211 91,960 95,125 82,302 53,712 117,515 38.43 113,785 80,050 71,120 14.00

¥1,573,230 1,151,705 421,525 104,258 107,567 94,866 55,766 62,561 39.89 85,124 78,440 66,269 14.00

¥1,555,945 1,106,656 449,289 122,927 118,219 98,342 60,288 45,088 43.11 66,014 84,092 62,320 11.00

¥1,392,212 1,021,803 370,409 57,622 56,367 46,056 25,286 — 18.08 83,990 86,166 62,924 10.00

¥1,521,178 1,127,213 393,965 34,959 32,500 19,031 4,745 — 3.39 126,725 79,436 60,849 10.00

¥1,663,778 1,176,441 487,337 127,656 120,456 105,599 69,945 — 50.01 82,911 73,983 56,170 13.00

¥1,623,791 1,195,751 428,040 127,801 126,507 114,883 68,575 — 49.00 84,413 71,646 52,426 12.00

2013

2012

2011

2010

2009

2008

2007

¥1,800,170 309,677 461,581 263,704 812,080 581.05 45.1 28,363

¥1,410,568 279,206 416,119 227,489 706,846 505.72 50.1 25,409

¥1,425,879 256,248 418,354 220,773 663,566 474.59 46.5 25,016

¥1,368,892 251,084 447,497 226,331 633,343 452.91 46.3 25,085

¥1,379,337 273,539 441,271 218,477 603,846 431.77 43.8 24,244

¥1,425,367 272,372 424,193 234,873 666,244 476.39 46.7 23,854

¥1,459,922 240,006 426,959 281,502 645,655 461.50 44.2 23,715

Environmental and safety investment

Greenhouse gas emissions from production processes

(¥ billion)

(million tons CO2 equivalent)

7.88

8 6

3.80

4.06

3.84 3.03

3

3.90

2

2

1

0

0

'12 Environmental investment

'13

'14

'15

'16

'12

(FY)

Safety investment

600 500 400

370

410

454

'13

Carbon dioxide Nitrous oxide Sulfur hexafluoride

Number of women working as managers3

500

534

'14 Methane

'15 HFCs

'16

(FY)

PFCs

Employees using parental leave4 600 500 400

300

300

200

200

100

100

454

468

457

'12

'13

'14

556

582

'15

'16

0

0

'13/6

'14/6

'15/6

'16/6

'17/6 Women

3

4.17

4.11

4

5.38

5.20

4

5

 esults as of June 30 each year for personnel employed by Asahi Kasei Corp., R Asahi Kasei Microdevices Corp., Asahi Kasei Homes Corp., Asahi Kasei Construction Materials Corp., Asahi Kasei Pharma Corp., and Asahi Kasei Medical Co., Ltd. (Asahi Kasei Chemicals Corp., Asahi Kasei Fibers Corp., and Asahi Kasei E-materials Corp. included in FY2015 and earlier).

4

(FY)

Men

 esults for personnel employed by Asahi Kasei Corp., Asahi Kasei Microdevices R Corp., Asahi Kasei Homes Corp., Asahi Kasei Construction Materials Corp., Asahi Kasei Pharma Corp., and Asahi Kasei Medical Co., Ltd. (Asahi Kasei Chemicals Corp., Asahi Kasei Fibers Corp., and Asahi Kasei E-materials Corp. included in FY2015 and earlier). Asahi Kasei Report 2017

39

At a Glance

The Asahi Kasei Group operates business in the three sectors of Material, Homes, and Health Care. The “Cs for Tomorrow 2018” medium-term management initiative is focused on raising corporate value through optimal allocation of management resources across the three sectors.

Business sector

Material

FY2017 net sales and operating income* Net sales and operating income are forecasted to increase in all three sectors.

Homes

Health Care

14.8 %

Material

FY2017

52.4 %

Net sales

Homes

32.8 %

(planned)

¥1,990 billion

Health Care

18.7 %

Material

FY2017

47.4 %

Operating income Homes

33.9 %

(planned)

¥165 billion

* Original forecast announced on May 11, 2017. Note: Percentages shown exclude “Others” category and “corporate expenses and eliminations.”

40

Asahi Kasei Report 2017

Health Care

FY2017 forecast

Business units

● ●

Major products

Asahi Kasei Corp. Asahi Kasei Microdevices Corp.

Net sales



1,033.0

billion

Fibers & Textiles SBU Petrochemicals SBU Performance Polymers SBU Performance Materials SBU Consumables SBU Separators SBU Asahi Kasei Microdevices Corp. (electronic devices)

Operating income



90.0

billion

Hipore™ lithium-ion battery (LIB) separator

Membrane-process ion-exchange plant

Lamous™ microfiber suede Acrylonitrile plant

● ●

Net sales



647.0

billion

Asahi Kasei Homes Corp. Asahi Kasei Construction Materials Corp.

Homes Construction Materials

Hebel Haus™

Atlas™ condominiums

Hebel Building™ System

Neoma Foam™ phenolic foam insulation panels

Operating income



64.5

billion

Asahi Kasei Pharma Corp. Asahi Kasei Medical Co., Ltd. ● ZOLL Medical Corporation ● ●

Net sales



291.0

billion

Operating income



35.5

Pharmaceuticals Medical Care Acute Critical Care

Pharmaceutical products

Planova™ virus removal filter

billion ZOLL AED Plus™ automated external defibrillator

LifeVest™ wearable defibrillator

Asahi Kasei Report 2017

41

Operating Segments

Material From unique fiber materials to petrochemicals and synthetic resins, and from consumables such as Saran Wrap™ cling film to battery separators and electronic devices such as LSIs and sensors, our high value-added product portfolio is expanding on a global scale, contributing to a better future through unrivaled technologies. ■ Sales composition

52.3 %

Operating income composition

46.8 %

Net sales & operating income (¥ billion)

900

Fiscal 2016

Main products

■ Spunbond nonwovens ■ Leona™ nylon 66 filament ■ Acrylonitrile (AN) ■ Styrene ■ Polyethylene (PE) ■ Engineering plastics ■ Synthetic rubber ■ Microza™ hollow-fiber filtration

membranes

■ Ion-exchange membranes ■ Ceolus™ microcrystalline cellulose ■ Saran Wrap™ cling film ■ Sunfort™ photosensitive dry film ■ Hipore™ and Celgard™ Li-ion battery

separators

■ Daramic™ lead-acid battery separator ■ Mixed-signal LSIs ■ Hall elements

42

Asahi Kasei Report 2017

977.9 88.5

1,033.0 90.0

300

30

0

0

'16 Not including “Others” category and corporate expenses and eliminations.

90

60

Net sales (left scale)

'17*

(forecast)

(FY)

Operating income (right scale)

* Beginning with FY2017, the Energy Division, which was formerly included in Others, is reclassified into the Material segment. FY2016 figures are recalculated in accordance with the new classification.

Highlights

■ Bemberg™ cupro fiber ■ Roica™ premium stretch fiber

120

600

Hideki Kobori Executive Officer for Material business sector President & Representative Director, Presidential Executive Officer, Asahi Kasei Corp.

(¥ billion)

1,200

• Launch of Klaran™ UVC LEDs for disinfection

With light emission in the vicinity of 265 nm—the wavelength most effective for disinfection—and featuring high output with a small footprint, Klaran™ affords unprecedented flexibility in the design of disinfection products and systems. A wide range of applications is expected to include healthcare, home electronics, and various other fields where UVC disinfection of water, air, and surfaces had previously been impractical.

• Capacity expansion for Hipore™ LIB separator

With increasing demand for hybrid-electric and allelectric vehicles worldwide, the lithium-ion battery (LIB) market is forecasted to grow substantially in automotive applications, in addition to applications for consumer electronics. Capacity expansion at the plant in Moriyama, Shiga, will further reinforce our capability to provide stable supply to meet rising global demand for LIB separators.

Fibers and Textiles tell us about your proactive investments for growth and the earnings contribution of each business, Q Please as well as the outlook for fiscal 2017. A

Sales and operating income decreased in fiscal 2016 with the impact of the stronger yen. We aim to increase sales and operating income in fiscal 2017 by leveraging the investments we made for growth.

Although shipments were firm in fiscal 2016, sales and operating income decreased with the impact of the stronger yen. Demand for Bemberg™ cupro fiber continues to grow as material for ethnic garments in India and Pakistan as well as functional innerwear. Sales of Lamous™ microfiber suede are expanding in automotive interior applications. Recent expansions of production

capacity—for Bemliese™ continuous-filament cellulose nonwoven to meet growing demand in facial masks, and for Leona™ nylon 66 filament to meet growing demand in air bags—are contributing to increased earnings. We forecast firm demand for each product in fiscal 2017, with recent capacity expansions expected to enable further growth.

Chemicals reported lower sales but increased operating income for the Chemicals business in fiscal 2016. What is Q You the current situation and future outlook for petrochemicals, synthetic rubber, and engineering plastics? A

Sales decreased and operating income increased in fiscal 2016 as the stronger yen impacted each product category and terms of trade for acrylonitrile (AN) improved. We forecast increased shipments of each product in 2017 while a scheduled maintenance turnaround of the naphtha cracker will have a negative impact, resulting in higher sales and lower operating income.

Petrochemicals sales decreased in fiscal 2016 with lower shipments of styrene following the strengthening of petrochemical operations in Japan, but operating income increased with improved terms of trade for AN. In performance polymers, sales increased with growing shipments of synthetic rubber for fuel-efficient tires and engineering plastics, but operating income decreased due to the impact of the stronger yen. We forecast higher sales in fiscal 2017 with further growth in synthetic rubber for fuel-efficient tires and engineering plastics,

but lower operating income as an effect of a maintenance turnaround scheduled at the naphtha cracker of Asahi Kasei Mitsubishi Chemical Ethylene Corp. in Mizushima, Okayama, Japan. In July 2017 we decided to increase production capacity of our plant in Singapore for synthetic rubber for fuel-efficient tires to meet rapidly growing demand against a background of greater motorization in emerging markets and more stringent environmental regulations around the world.

Electronics did separators and electronic devices perform in fiscal 2016, and what is your outlook moving Q How forward? A

Sales grew with strong shipments of each product in fiscal 2016, but operating income decreased as an effect of the stronger yen and amortization of goodwill related to the acquisition of Polypore. We forecast higher sales and operating income in fiscal 2017 with further shipment growth for each product.

Fiscal 2016 separators sales increased with greater shipments across the board and a full-year contribution from Polypore which we acquired in the second quarter of fiscal 2015, but operating income decreased with the impact of the stronger yen and amortization of goodwill related to the Polypore acquisition. We have decided to increase production capacity for Hipore™ lithium-ion battery (LIB) separator to meet brisk demand growth in automotive applications, including hybrid-electric and all-electric vehicles.

We plan to make further proactive expansions of our LIB separator supply infrastructure, raising our capacity to 1.1 billion m2/year by 2020. Both sales and operating income for electronic devices increased in fiscal 2016, despite the impact of the stronger yen, with growing shipments of audio devices for smartphones. We forecast higher sales and operating income in fiscal 2017 with increased shipments of both separators and electronic devices.

Asahi Kasei Report 2017

43

Operating Segments

Homes With our homes business that provides high-quality products and services for Long Life Homes that maintain high customer satisfaction that lasts more than half a century, and our construction materials business that provides innovative and original high value-added products, we set the stage for a rich and fulfilling lifestyle. ■ Sales composition

33.2 %

Operating income composition

35.5 %

Net sales & operating income (¥ billion)

(¥ billion)

800

600

100

647.0

619.0 64.1

Fumitoshi Kawabata Executive Officer for Homes business sector Senior Executive Officer, Asahi Kasei Corp. President & Representative Director, Asahi Kasei Homes Corp.

Main products

Fiscal 2016

75

64.5

400

50

200

25

0

0

'16 Not including “Others” category and corporate expenses and eliminations.

Net sales (left scale)

'17

(forecast)

Operating income (right scale)

Highlights

■ Hebel Haus™ unit homes ■ Hebel Maison™ apartment buildings ■ Atlas™ condominiums ■ Hebel Rooms™ apartment rental

network ■ Remodeling ■ Mortgage financing ■ Hebel™ AAC panels ■ Neoma Foam™ phenolic foam insulation panels ■ Foundation systems ■ Structural systems and components

• Launch of Hebel Building™ System Asahi Kasei Homes launched the sale of its Hebel Building™ System enabling higher quality, higher precision construction of medium-rise buildings by using systematic manufacturing techniques, developed mainly targeting 4–6 story buildings with space for commercial use on upper floors. By leveraging the company’s core technology for heavy-frame steel structures as well as the manufacturing and construction systems of the Hebel Haus Frex™, the new system enables the construction of buildings up to 8 stories while maintaining high quality and precision. It also affords exceptional flexibility in design, with ceiling height ranging from 2.8 to 3.5 m, suitable for commercial purposes.

• Launch of Comfortable Space Laboratory™ Asahi Kasei Construction Materials launched its Comfortable Space Laboratory™ in Sakai, Ibaraki, Japan, as a facility to exhibit and allow visitors to experience the outstanding thermal insulation performance of Neoma Foam™ panels. The laboratory will serve as a venue to raise public awareness on the importance of the thermal environment and insulation performance, as well as the quality of Neoma Foam™ products.

44

Asahi Kasei Report 2017

Homes Q

How did your homes business perform in fiscal 2016, and how is the trend for home orders?

A

Both sales and operating income decreased in fiscal 2016 with lower deliveries of order-built homes. After the full resumption of advertising, however, orders recovered to the same level as in the previous year.

Deliveries of Hebel Haus™ unit homes and Hebel Maison™ apartment buildings decreased reflecting a decline in orders received in fiscal 2015, and advertising expenses increased. Labor costs increased for remodeling operations, while real estate operations grew in line with an increased number of rental units under management. For homes overall, both sales and operating income decreased. After the full resumption of advertising in May 2016, home orders recovered to the previous year’s level and increased by +0.1% for the full year. To gain further growth in orders, we held an “Outdoor Living Fair” to showcase how the rooftop of Hebel Haus™ homes can be filled with enjoyable greenery and nature even while generating electricity. We also expanded the marketing area for Hebel Maison™ apartment buildings with features that enrich the living environment for tenants with dogs and cats.

Medium-rise built with the Hebel Building™ System

Hebel Maison Boriki™

Construction Materials Q A

Please tell us about the situation in fiscal 2016, and prospects for the future.

Both sales and operating income decreased in fiscal 2016 with lower shipments of autoclaved aerated concrete (AAC) panels and foundation systems. Although feedstock costs are expected to increase, fiscal 2017 operating income is forecasted to be even with the previous year thanks to increased shipments of Neoma Foam™ high-performance foam insulation panels.

Fiscal 2016 shipments of Neoma Foam™ grew mainly for use in wood-frame houses, but shipments of foundation systems and Hebel™ AAC panels declined. Both sales and operating income decreased for construction materials overall. Although demand related to construction projects in preparation for the Tokyo Olympics and Paralympics is anticipated to begin materializing around the middle of fiscal 2017, the business environment for construction materials is expected to be challenging with stagnating demand related to construction of rental homes and rising transportation costs. We forecast sales to increase and net income to be on the same level as the previous year with shipment growth mainly in Neoma Foam™ insulation panels.

Neoma Foam™ phenolic foam insulation panels

Comfortable Space Laboratory™

Asahi Kasei Report 2017

45

Operating Segments

Health Care We contribute to advanced medical care around the world with world-class drugs in the fields of orthopedics, critical/intensive care, and the immune system; blood purification devices for chronic and acute renal failure, and various intractable diseases; and products for the manufacturing process of biopharmaceuticals and other new drugs. Our life-saving products in the field of acute critical care include AEDs, defibrillators for professional use, and intravascular temperature management systems. ■ Sales composition

Yutaka Shibata Executive Officer for Health Care business sector (joint) Primary Executive Officer, Asahi Kasei Corp. President & Representative Director, Asahi Kasei Pharma Corp.

14.5 %

Operating income composition

17.7 %

Net sales & operating income (¥ billion)

(¥ billion)

300

291.0

270.1 200

Fiscal 2016

31.9

35.5

40

20

100

0

0

'16 Not including “Others” category and corporate expenses and eliminations.

60

Net sales (left scale)

'17

(forecast)

Operating income (right scale)

Highlights

Richard Packer Executive Officer for Health Care business sector (joint) Primary Executive Officer, Asahi Kasei Corp. Chairman & Board Director, ZOLL Medical Corporation

Main products ■ Teribone™ osteoporosis drug ■ Recomodulin™ anticoagulant ■ APS™ polysulfone-membrane

dialyzers ■ Therapeutic apheresis devices ■ Planova™ virus removal filters ■ Defibrillators for professional use ■ LifeVest™ wearable defibrillator ■ AED Plus™ automated external defibrillator ■ Thermogard System™ temperature management system

46

Asahi Kasei Report 2017

• Japanese approval of Reclast® for intravenous infusion 5 mg*

Asahi Kasei Pharma obtained approval for the sale of Reclast® for intravenous (i.v.) infusion 5 mg in Japan for the treatment of osteoporosis. Reclast® is an osteoporosis drug capable of a year-long treatment with intravenous administration one time each year. * Reclast® is a bisphosphonate developed by Novartis Pharma AG and was first approved in 2007 in the US and EU followed by approval in over 115 countries worldwide. Reclast® is a trademark of Novartis Pharma AG.

• New spinning plant for Planova™ BioEX filters

Asahi Kasei Medical constructed a new plant for the spinning of hollow-fiber membranes for Planova™ BioEX virus removal filters at its Planova Oita Plant in Oita, Japan. Incorporating hydrophilic polyvinylidene fluoride (PVDF) hollow-fiber membranes, Planova™ BioEX virus removal filters are used in the production process for biotherapeutic products such as biopharmaceuticals and plasma derivatives. The hollowfiber membranes produced at the new spinning plant will be used in the assembly of Planova™ BioEX filters at plants in Oita and Nobeoka.

Pharmaceuticals and Medical Care Q

Please tell us about fiscal 2016 results and the fiscal 2017 forecast for the pharmaceuticals and medical care businesses.

A

Net sales and operating income decreased in fiscal 2016 with reduced reimbursement prices and competition from generics. We are forecasting both sales and operating income to increase in fiscal 2017 with increased shipments of Teribone™ osteoporosis drug and Planova™ virus removal filters.

Although shipments of Teribone™ osteoporosis drug and Recomodulin™ thrombomodulin increased, fiscal 2016 sales and operating income from pharmaceuticals decreased with the impact of reduced reimbursement prices, including repricing of Teribone™ for market expansion, and the impact of competition from generics on Flivas™ agent for treatment of benign prostatic hyperplasia. Although shipments of Planova™ virus removal filters increased, sales and operating income from medical care decreased with the impact of the stronger yen and the impact of reduced reimbursement prices for dialysis-related products in Japan. In fiscal 2017, in pharmaceuticals operations we expect increased R&D expenses related to the development of an autoinjection formulation of Teribone™ and a further impact on Flivas™ due to competition from generics, but increased shipments of Teribone™ following approval to extend the maximum duration of treatment. In medical care operations we expect firm sales centering on Planova™. Increased sales and operating income are forecasted for pharmaceuticals and medical care as a whole.

Medical care products

Pharmaceuticals

Acute Critical Care Q

The acute critical care operation continues to grow. Please tell us about fiscal 2016 results and the fiscal 2017 forecast.

A

Fiscal 2016 saw continued growth in operating income. We forecast further growth in fiscal 2017.

The acute critical care business continued to expand well in fiscal 2016. Although sales showed a decline when translated into consolidated accounts due to the impact of the stronger yen, both sales and operating income increased on a US-dollar basis. The LifeVest™ wearable defibrillator business continued to expand well, especially in the US, and sales of other products such as defibrillators and related accessories also increased. Operating income grew in both Japanese-yen and US-dollar terms despite increased SG&A expenses associated with an ongoing increase in personnel to reinforce sales activities. Sales on a US-dollar basis have grown at an average of 15% per year for the past 10 years. The trend in fiscal 2017 will be largely unchanged, with continuous growth expected. Although we anticipate higher SG&A expenses with reinforced sales activities, we forecast higher net sales and operating income centering on the LifeVest™ business.

LifeVest™ wearable defibrillator

ZOLL AED Plus™ automated external defibrillator

Asahi Kasei Report 2017

47

Feature 4: Research & Development

New business creation with R&D leveraging diversification Masafumi Nakao

Representative Director, Vice-Presidential Executive Officer; Executive Officer for R&D

Strategy of New Business Creation One of our basic strategies under the “Cs for Tomorrow 2018” medium-term management initiative is “creation of new businesses.” Having various technologies and diverse business operations, the Asahi Kasei Group is striving to create new value through combinations among core technologies, multifaceted business models, and diverse human resources. The areas of “clean environmental energy” and “healthy/ comfortable longevity with peace of mind” are targeted in R&D to create new businesses that provide solutions to challenges faced by society.

Our main areas of focus to address social issues

Foster and acquire core technology Acquire technology seeds Apply technology laterally

Society of clean environmental energy

CVC

Society of healthy/ comfortable longevity with peace of mind

Utilize market channels

Coordination/ combination

Heighten added value

Strengths of Asahi Kasei

Business models Solutions

M&A

Enhance and fully utilize business platforms

■ Aims and approach for new business creation The Asahi Kasei Group will create new businesses by leveraging our strengths in technology and operations from a 3-axis perspective. The first axis is to enhance and fully utilize our market channels. By utilizing the various market channels and platforms of each business area throughout the Asahi Kasei Group, we will develop a broad range of new businesses. The second axis is to foster and acquire core technology. While

performing in-house R&D, we will actively apply new external technologies to enhance our core technologies. The third axis is to heighten added value. In addition to just supplying substances, which had been our main approach particularly in material businesses, we will place greater emphasis on building new business models around services and solutions.

Approach for new business creation viewed by market axis and technology axis Established mature markets

Established growth markets

New markets

Newly developed technologies

Existing technologies/ improvements/ combinations

until FY2018

48

1. C  oordinate with strategic business units and core operating companies Maximizing value of established businesses • B rand strength/market channels • C  ost competitiveness • Services

until FY2025 3. C  oordinate with strategic business units and core operating companies •M  arketing • F ull utilization of Asahi Kasei

2. U  tilize information technology, study new business models Creating added value from new perspectives •H  igher added value from solutions

Group technologies and business platforms  cquiring missing parts (CVC) •A

4. R  eview programs, examine originality and differentiation B-to-C in Health Care and Homes sectors • B etter therapy

5. F ocus on strong points and accelerate •A  ccelerating R&D  cquiring technology seeds/ •A

• Comfortable residential living

B-to-B in Material sector •D  isregarding mature markets

• Pursuing originality and differentiation in growth markets

Asahi Kasei Report 2017

Potential future markets

sprouts by CVC  ew business models •N

6. B asic/exploratory research in collaboration with universities and government research organs Long-term perspective •D  evelop/acquire leading-edge

technology  ollaboration with outside research •C institutions

We perform longer-term group-wide corporate R&D projects where we identify business areas with a high degree of novelty and markets having high growth potential. R&D for further enhancement of existing businesses is focused on ways to build on our strengths. We aim to create new businesses by leveraging our diversification through seamless connections between projects as well as through proactive collaboration utilizing outside resources including CVC.

R&D at the Asahi Kasei Group The strength of the Asahi Kasei Group is the ability to create new businesses based on our wide range of technologies and to manage diverse fields of operation. Throughout our history of diversification, we have leveraged a wide variety of technologies cultivated in chemicals operations to establish

a number of core technologies. Since our founding, we have constantly performed R&D to meet the world’s needs and created new businesses based on technology. While our business environment and the structure of society are rapidly changing, we will continue to strive for the creation of new value.

■ R&D organization We reviewed our R&D organization at the time of our transition to an operating holding company configuration in April 2016. Material-related R&D is now combined together under Corporate Research & Development, with efforts advancing

in coordination with the R&D sections of each SBU. Under the new configuration, R&D with a longer perspective is seamlessly connected with product development peripheral to established businesses.

Asahi Kasei Corporation Corporate Research & Development • • • • •

Technology Policy Center CVC Office Corporate IP Analysis & Simulation Center R&D Center

Clean Energy Project

Material Asahi Kasei (operating function) • F ibers & Textiles • P etrochemicals • P erformance Polymers • P erformance Materials • C onsumables • S eparators

Asahi Kasei Microdevices •R  esearch & Development Center

• • • • • • •

Healthcare R&D Center Synergistic Solution Initiative Yamashita Laboratory Chemistry & Chemical Process Laboratory Fibers & Textiles Technology Center Performance Polymers Technology Center Performance Materials Technology Center

UVC Project

Homes

Corporate Production Technology • Maintenance Technology Center • Engineering Center • Production Technology Center

Residential Living Project

Health Care

Asahi Kasei Homes

Asahi Kasei Pharma

• T echnology Div. • N ew Business Development Dept. • H ousing R&D Center • L ifestyle R&D Laboratory

•C  linical Development Center • P harmaceutical Research Center

Asahi Kasei Construction Materials •P  roducts & Marketing Development Dept. • M aterials Technology Dept.

Asahi Kasei Medical •M  edical Products Development Div.

ZOLL Medical • R &D departments

Asahi Kasei Report 2017

49

Feature 4: Research & Development

■ Main R&D bases around the world With R&D bases located around the world, we are able to meet a wide variety of needs in each market. North America: Acquiring new technology (CVC); Healthcare-related R&D; new business creation

R&D sites overseas

Waltham, Massachusetts Asahi Kasei Pharma America

Asia, ASEAN: Technical Center located in close proximity to market demand

Chelmsford, Massachusetts

Dormagen, Germany

ZOLL, CVC

Engineering Plastics Technical Center

Menlo Park, California

Shanghai, China Engineering Plastics Technical Center

CVC

Guangzhou, China

Owensboro, Kentucky

Engineering Plastics Technical Center

Polypore

Albany, New York

Vietnam

Crystal IS: UVC LED

Charlotte, North Carolina

Computer Aided Engineering

(CAE)

Polypore

R&D sites in Japan Core R&D sites Kawasaki, Ohito, Fuji, Moriyama, Mizushima, Nobeoka, etc.

■ R&D expenses Each SBU performs R&D both to reinvigorate and enhance existing businesses and to create new businesses for the future.

Critical Care

Corporate expenses

14.3%

17.1%

Fibers

Breakdown of R&D expenses

3.7%

79.6 billion

Health Care

¥

24.8%

Chemicals

(FY 2016)

Annual R&D expenses (¥ billion)

90

79.6

75.5 71.1 71.1

70

66.3

21.4%

Construction Materials

81.1

80

62.3 60

1.0%

Homes

50

3.3%

Asahi Kasei Report 2017

Electronics

14.5%

0

’10

’11

’12

’13

’14

’15

’16

(FY)

■ Core technologies that support Asahi Kasei products Compound semiconductor/LSI ● ●

Application-specific IC ● Electronic compass IR sensor/gas sensor ● Magnetic sensor

Homes/construction materials Catalyst/process Cyclohexanol ● AN/MMA ● CreolexTM metallocene polyethylene ● SunfineTM ultrahigh molecular weight polyethylene ●

Compound semiconductors Catalysis/ inorganic synthesis

Software algorithms



Foam insulation

Chemical process

Anti-quake/ construction methods/ anti-fire/durability

Core Technologies

Polymers/processing

Polymer design/ polymerization/ ● Performance polymers: LeonaTM, XyronTM, TenacTM, etc. processing Synthetic rubber: TuftecTM/TufpreneTM, etc. ● SB latex/Dura-PhotoTM ● AsacleanTM ● Saran WrapTM cling film ● Photosensitive resins: SunfortTM, PimelTM, APRTM/AFPTM ● NovacureTM latent hardener

Hebel HausTM unit homes Hebel MaisonTM apartment buildings ● HebelTM autoclaved aerated concrete ● Neoma FoamTM phenolic foam insulation ●

Bio pharmaceuticals



Functional polymer Polymerization/ spinning/ cellulose

Fibers Spunbond nonwovens ● BemlieseTM ● LamousTM ● RoicaTM ● LeonaTM filament ● BembergTM ●

Health Care

Biological information Virus processing removal/ Phase separation/ blood purification electrochemistry

Prescription drugs: TeriboneTM, RecomodulinTM, etc. Acute critical care devices: AEDs, LifeVestTM, etc. ● Blood purification: Artificial kidneys (APSTM), therapeutic apheresis devices ● PlanovaTM virus removal filters ● ●

Membranes/separation ●

MicrozaTM



Ion-exchange membranes



HiporeTM

IP Strategy To facilitate the creation of new businesses as an important management task in the Asahi Kasei Group, the management strategy, IP strategy, and R&D strategy of each operation are integrated as one. IP activities directly contribute to the management of operations by acquiring IP rights from R&D results to gain business advantage, enabling the creation of new businesses, and securing the profitability of existing businesses. Japanese Patent Applications 1.6% 5.4% 4.4% b a

11.8% 5.5% b

c

Total 834

Overseas Patent Applications 34.19%

2.0%

1.4% a 10.9% c 4.1% b

8.9%

The business units take the lead in formulating an IP strategy that matches the characteristics of each operation. Emphasis is placed on the quality of individual patents as well as the quantity of patents. Strategic licensing is performed when it is deemed an effective means to heighten the contribution of IP rights to our own business operations.

Japanese Trademark Applications

10.0% 1.2%

7.2% 5.7%

12.2%

b

20.7% b

Total 147* a

a

37.2%

Overseas Trademark Applications

60.5%

a

Total 140

15.7%

4.9% 4.9%

b

2.9% c

0.7%

c

3.7% b

Total 81

a

75.3%

a

47.1%

■ Holding company ■ Material (a: Chemicals b: Fibers c: Electronics) ■ Homes (a: Homes b: Construction Materials) ■ Health Care (Pharmaceuticals, Medical Care) ■ Others (From January 1 to December 31, 2016) * Overseas applications for a single patent family are counted as one.

Asahi Kasei Report 2017

51

CSR

Medium-Term Management Initiative and CSR Fundamentals The Asahi Kasei Group is focused on providing solutions to various challenges faced by society in accordance with our Group Mission of contributing to life and living for people around the world. Under our Cs for Tomorrow 2018 management initiative which began in fiscal 2016, we are emphasizing business operations that contribute to a “society of clean environmental energy” and a “society of healthy/comfortable longevity with peace of mind” based on four CSR Fundamentals: Compliance, Responsible Care, Corporate Citizenship, and Respect for Employee Individuality.

Position of CSR Fundamentals

Creating for Tomorrow The employee

The community Community outreach

The environment

Employee fulfillment

The customer Customer satisfaction

Society of clean environmental energy

Compliance

Environmental protection

Sustainable Increase in Corporate Value The supplier

The local economy

Fair business dealings

Local economic participation

Creation of new businesses

The shareholder

P. 30

Shareholder returns

Society of healthy/comfortable longevity with peace of mind

Business operations

Pursuit of growth and profitability

Area of focus

Acceleration of globalization

“Cs for Tomorrow 2018” strategic management initiative

CSR in Action

CSR Fundamentals

Responsible Care

P. 54

Respect for Employee Individuality P. 58

Compliance, Responsible Care, Corporate Citizenship, Respect for Employee Individuality

Corporate Citizenship Group Mission Contributing to life and living for people around the world

52

Asahi Kasei Report 2017

P. 60

Our four CSR Fundamentals of Compliance, Responsible Care, Corporate Citizenship, and Respect for Employee Individuality are applied throughout the Asahi Kasei Group.

CSR Fundamentals Key subjects under CT2018

Goals • Gain trust through not only thorough compliance with laws and regulations, but also consideration of generally accepted social norms

I dentification of compliance-related issues  nriching the risk compliance E system

•U  nderstand risks in management, and establish a system to mitigate them and enable sustainable development

Environmental protection Operational safety Workplace safety and hygiene Health maintenance Product safety Managing chemical substances

• Contribute to establishment of a recyclingoriented society • Enrich system for risk assessment • Zero workplace injuries •M  aintain and promote employees’ health • Enrich RC compliance • Minimize risks from chemicals

 issemination of D Human Resources Principles Developing human resources

• Employee engagement in challenging and fulfilling work in global business operations •W  orkplace environment that respects diversity and work-life balance, enabling employees to perform to their full potential

(global human resources)

Valuing human rights and diversity Balancing work and family life Stakeholder dialog • Customers • Investors • Suppliers

Platinum Kurumin certification for outstanding support for the development of the next generation.

• Maintain good relationships with stakeholders •U  tilize our resources to provide solutions to challenges faced by society

• Public outreach

Community fellowship

Asahi Kasei Report 2017

53

Responsible Care Safety is a fundamental prerequisite for the continuation of operations as a corporate member of society. To ensure that every aspect of safety is maintained, the Asahi Kasei Group implements a Responsible Care (RC) program comprising the six pillars of operational safety, workplace safety and hygiene, environmental protection, health maintenance, product safety, and community outreach.

CSR Fundamentals

Message from the Executive for RC

Masafumi Nakao Representative Director, VicePresidential Executive Officer Asahi Kasei Corp.

Asahi Kasei adopted an operating holding company configuration in fiscal 2016 and started the three-year medium-term management initiative “Cs for Tomorrow 2018” (CT2018). We are not only implementing various measures to achieve our business targets and build the base for the next phase towards fiscal 2025, but also contributing to society through our business operations. The operating climate is changing greatly with growing awareness for global environmental issues and corporate responsibility as a social entity. At the Asahi Kasei Group, in accordance with our Group Mission of contributing to life and living for people around the world, we will give due consideration to the environment, safety, and health throughout the full life cycle from R&D to manufacturing, product supply, and disposal, while focusing on the three fundamental “actuals” of the actual place, actual thing, and actual fact, as we ensure the stable provision of product quality that our customers can depend upon. While working to achieve our annual RC objectives, we will also advance RC activities from a broader perspective, reinforcing R&D to provide solutions to global warming and other environmental issues, in order to raise our corporate value for our various stakeholders.

Responsible Care at Asahi Kasei RC represents the commitment and initiative to secure and improve safety and environmental protection at every step of the product life cycle through the individual determination and responsibility of each firm producing and handling chemical products, together with measures to gain greater public trust through disclosure and communication. RC was conceived in Canada in 1985, and was strengthened on a global scale with the establishment of the International Council of Chemical Associations (ICCA) in 1990. In 1995, the chemical industry in Japan began implementing RC with the establishment of the Japan Responsible Care Council (JRCC*). Asahi Kasei was among the founding members of the JRCC, and played a leading role in the expansion and development of RC in Japan. RC at the Asahi Kasei Group is not limited to chemicals-related operations but encompass operations in all fields, including homes, health care, fibers, electronics, construction materials. * JRCC: Operated as the Japan Chemical Industry Association’s RC Committee since April 2011.

Asahi Kasei Group RC Principles RC at the Asahi Kasei Group is guided by the following principles: In April 2016, a statement regarding quality assurance was added, and the six elements were condensed into four.

We give the utmost consideration to environmental protection, quality assurance, operational safety, workplace safety and hygiene, and health maintenance, throughout the product life cycle from R&D to disposal, as preeminent management tasks in all operations. •W  e give full consideration to the global environment, and make efforts to reduce the environmental burden of all operations. •W  e continuously provide safe products and services with the quality that gives customers a sense of security and satisfaction. •W  e strive for stable and safe operation while preventing workplace accidents and securing the safety of personnel and members of the community. •W  e strive for a comfortable workplace environment, and support the maintenance and promotion of employee health. In addition to maintaining legal compliance, we set self-imposed targets for continuous improvement, while performing proactive information disclosure and communication to gain public understanding and trust. Revised on April 1, 2016

RC Management System The management system of Asahi Kasei Group RC is maintained in accordance with our Group RC Management Guidelines and other internal standards. The RC Committee, a corporate organ under the direct authority of the President of Asahi Kasei, deliberates RC plans and results and ensures that continuous reevaluation and improvement are systematically pursued with “plan-do-check-act” (PDCA) cycles—for the Asahi Kasei Group as a whole, within each core operating company and Region*, and within individual plants and facilities.

54

Asahi Kasei Report 2017

Certified compliance with internationally standardized management systems is obtained for the RC Management System of the Asahi Kasei Group. We have obtained ISO 14001 environmental management system certification for environmental protection and ISO 9001 quality management system certification for product safety. An Occupational Health & Safety Management System (OHSMS) is adopted for workplace safety, hygiene, and health. * A site or group of sites consisting of several plants and facilities of various core operating companies. Each Region General Manager is responsible for the unified implementation of RC in the respective Region.

For more information, please refer to the Asahi Kasei Group CSR website. http://www.asahi-kasei.co.jp/asahi/en/csr/

RC objectives and results

★★★Complete ★★Satisfactory ★Unsatisfactory

Living in Product safety and health and management of chemical comfort substances

Health maintenance

Workplace safety and hygiene

Operational safety

Environmental protection

RC compliance

FY2016 RC Objectives

FY2016 Results Attainment FY2017 RC Objectives Review RC framework (including quality assurance) Preparation for follow-up on RC compliance at overseas companies ★★ Enhance RC compliance (start in FY2017 using external organizations such as ERM) Enhance RC compliance RC training course partially revised Advance RC education and training for section managers and Group discussions enhanced Further advance RC education and training ★★ assistant chiefs (gaining fuller understanding) Follow-up until all members pass test Communication and coordination with superiors RC at affiliates enhanced through instructions and support ★★★ Enhance RC at affiliates Enhance RC at affiliates by core operating companies RC reports of 2 core operating companies and ★★★ Continue to enhance dialog with the public Enhance dialog with the public 8 plant complex sites were used in community outreach No polluting accidents or serious incidents, ★ Avoid all polluting accidents and minor incidents Avoid all polluting accidents and minor incidents 27 incidents (2 other than freon leaks) Promote recycling-oriented society: Promote recycling-oriented society: ★★★ · Maintain rate of final disposal at 0.3% or less of generated industrial waste · Final disposal of 0.3% or less of generated industrial waste Goal reached with final disposal rate of 0.3% · Recycling rate of at least 90% Goal reached with recycling rate of 98% · Maintain recycling rate of at least 90% Prevention of global warming: Prevention of global warming: 45% reduction from FY2005 level · Reduce CO2 emissions in Japan by 28.7% from FY2005 level · Reduce CO2 emissions in Japan by 28.2% from FY2005 level ★★★ · Reduce global CO2 emissions by 5% from FY2010 level 29.6% reduction from FY2010 level · Reduce global CO2 emissions by 5% from FY2010 level · Reduce GHG emissions in Japan by 34.8% from FY2005 level 48.6% reduction from FY2005 level · Reduce GHG emissions in Japan by 34.8% from FY2005 level LCA/CO2 contribution ratio of 10.3 · Achieve LCA/CO2 contribution ratio of 8.5 · LCA/CO2 contribution ratio1 of 8.3 Protect water resources: Protect water resources: ★★★ Water resource contribution ratio of 8.5 · Water resource contribution ratio of 8.8 · Water resource contribution ratio2 of 8.3 Control emissions of chemical substances: Control emissions of chemical substances: ★★★ · Control emissions of PRTR specified substances · Control emissions of PRTR-specified substances Release of PRTR-specified substances and emission of VOCs reduced by 92% and 87%, respectively, from FY2000 level · Control emissions of air and water pollutants · Control emissions of air and water pollutants Continuously advanced actions in Nobeoka, Moriyama, and Fuji; ★★★ Promote preservation of biodiversity at each site Preserve biodiversity when procuring biological resources started new program at Asahi Kasei Jyuko Co., Ltd. in FY2016 ★★★ Advance CSR procurement Advance CSR procurement Implemented CSR procurement No serious industrial accidents, ★★★ Continue to avoid all industrial accidents Avoid all industrial accidents 3 incidents including minor industrial accidents and slight injuries Enhance risk assessment: Review performed at time of on-site confirmation Continuously monitor for hazards of fire, explosion, and leaks; ★★★ perform training of managers for preventing abnormal reactions · Continuously monitor for hazards of fire, explosion, and leaks · Continue ongoing review to prevent abnormal reactions and Confirmed progress in preventing abnormal reactions and confirm interlock functions ★★★ Prevent abnormal reactions, confirm interlock functions on-site securing interlock functions · Enhance pre-investment safety assessment system ★★★ Control changes to equipment and operating conditions Control changes to equipment and operating conditions Ongoing confirmation of implementation at RC Audits, etc. Review earthquake response and enhance emergency response systems: Enhance earthquake response system: ★★★ · Review earthquake preparedness Completed according to the plan · Confirm seismic resistance of high-pressure gas facilities and (emergency facilities, disaster response supplies) formulate plans ★★ · Implement seismic retrofitting for specific and non-specific buildings Delay in some retrofitting for FY2016 · Advance seismic retrofitting of specific and non-specific buildings Monitor for items in need of replacement and uninspected items, Information shared with Corporate Production Technology; Monitor for items in need of replacement and uninspected items, ★★★ implement remediation ongoing review with new perspectives implement remediation Avoid all workplace injuries: No serious workplace injuries: ★ 0.38 · Achieve frequency rate of 0.1 or less (1.0 or less overseas) · Achieve frequency rate3 of 0.1 or less Over 0.005 (tentative) · Achieve severity rate of 0.005 or less · Achieve severity rate4 of 0.005 or less Deepen utilization of OHSMS: ★★ Risk assessment level confirmed at audit and · Enhance risk assessment for workplace tasks improvements applied as necessary Avoid all accidents in “caught in/between machinery” category Prevent all accidents in “caught in/between machinery” category: (no lost-workday injury): ★ Advanced risk assessment for mechanical equipment, but one · Perform sound risk assessment for mechanical equipment · Perform sound risk assessment for mechanical equipment lost-workday injury in “caught in machinery” category occurred · Through standards of behavior for safety in irregular work in February 2017 Avoid chemical burn, poisoning, fire, explosion, etc. Avoid workplace injuries related to chemical substances: related to chemical substances (no lost-workday injury): ★★ · Perform sound risk assessment for chemical substances · Perform sound risk assessment for chemical substances Advanced risk assessment for chemical substances and management of workplace environment, but 1 lost-workday injury occurred · Perform sound management of workplace environment · Perform sound management of workplace environment Prevent injuries during working hours unrelated to operating procedures Prevent injuries during working hours unrelated to operating procedures and during commuting: and during commuting: ★★ · Prevent lost-workday injury related to stairways · Thorough standards of behavior for safety related to stairways and walking · 4 lost-workday injuries due to falls related to stairways and walking · I  njuries due to traffic accidents resulting in harm to self or others · Prevent traffic accidents resulting in harm to self or others · Program to prevent traffic accidents resulting in harm to self or others while commuting or traveling for sales decreased from 4 to 2 while commuting or traveling for sales while commuting or traveling for sales Enhance safety management guidance of on-site contractors: Prevent serious injuries related to on-site contractors and equipment work: ★★ · Improve the level of safety management guidance related to on-site · No serious accident of on-site contractors No serious injuries, but injury from forklift tip-over contractors and equipment work Reinforce management of safety on equipment work: ★★ · Zero severe injuries related to equipment work No serious injuries, but injury in “caught in machinery” category Promote health maintenance and improvement among personnel: Promote health maintenance and improvement among personnel: · Promote the prevention of and countermeasures to lifestyle-related Proportion of employees with health warning signs and obesity · Promote the prevention of and countermeasures to lifestyle-related ★★★ diseases diseases increased slightly; ratio of employees who smoke decreased Physical fitness tests performed as part of fall prevention program, · Prevent falls · Prevent falls follow-up implemented Promote countermeasures to mental health issues and Promote countermeasures to mental health issues and enhance support system: enhance support system: ★★★ Implement company-wide stress survey, utilize its results, · · Implement company-wide stress survey, utilize its results, Stress survey and follow-up implemented and perform follow-up and perform follow-up Develop the health management system: Improve the health management system: Held internal interviews and provided instructions · Resolve critical tasks at each site with lateral extension ★★★ · Resolve critical tasks at each site with lateral extension on health management activities Expanded scope of affiliates and independent plants supported · Establish the health management system at affiliates and · Establish the health management system at affiliates and independent plants independent plants by specialist industrial physicians Ongoing zero lost-workday injuries related to serious product safety ★★★ Maintain zero serious product safety incidents No product safety incidents incidents (review the definition) Enhance management of chemical substances: Enhance management of chemical substances: · P romote compliance with laws and regulations on management of · P romote compliance with laws and regulations on management of ★★ Compliance maintained and system enhanced chemical substances in Japan and overseas chemical substances in Japan and overseas Secretariat activities to promote JIPS; continued risk assessment · Encourage JIPS activities · Encourage JIPS5 activities and public disclosure of safety documents ★★ Provided and received information via MSDSplus and AIS, · Expand use of JAMP (chemSHERPA) · Promote JAMP6 tools used new JAMP scheme chemSHERPA Number of people our health care business contributed to: Number of people our health care business contributed to: ★ · Maintain the same level as FY2015 level 14% decrease from FY2015 level · FY2018 objective: maintain FY2015 level Number of residents in Hebel HausTM homes: Number of residents in Hebel HausTM homes: ★★ · 3.3% increase from FY2015 level 2.9% increase from FY2015 level · FY2018 objective: 10% increase from FY2015 level

L CA is used to determine the amount of reduction in CO2 emissions enabled by Asahi Kasei products and technologies in comparison with conventional products and technologies. The ratio is calculated by dividing this amount by the global CO2 emissions of the entire Asahi Kasei Group. The water resource contribution ratio is calculated by adding up the total quantity of water clarified and recycled using Asahi Kasei filtration technology and dividing this by the quantity of the Asahi Kasei Group’s water intake. 3 Number of accidental deaths and injuries resulting in the loss of one or more workdays, per million man-hours worked. 4 Lost workdays, severity-weighted, per thousand man-hours worked. 5 Japan Initiative of Product Stewardship: A chemical industry initiative promoted by the Japan Chemical Industry Association to minimize chemical risks through voluntary risk assessment and management. 6 Joint Article Management Promotion-consortium. 1

2

Asahi Kasei Report 2017

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Responsible Care

Environmental protection As in our Group Vision of “harmony with the natural environment,” the Asahi Kasei Group considers environmental preservation as one of the most important tasks. Our major focuses are on 1) prevention of global warming, 2) promotion of a recycling-oriented society, 3) management of chemical substances, and 4) preservation of biodiversity. For prevention of global warming, we have established new indicators and targets to curtail greenhouse gas emissions to be achieved by fiscal 2020. Regarding promotion of a recycling-oriented society, we continue to reduce our rate of final disposal and increase our rate of recycling. Furthermore, as a chemical company, we are working to promote safe handling of chemical substances and actively provide safety information. We are also making efforts to reduce the impact of our business activities on biodiversity.

Highlights ■ Climate-change effort ranked “A–” by CDP* for two consecutive years Our effort with respect to climate change was given an evaluation of “A–” by the CDP* in fiscal 2015 and 2016. ■ Moriyama Works receives Environmental Action Promotion Award Actions in Moriyama for the conservation of endangered

smallhead stickleback were recognized with an Environmental Action Promotion Award at the 9th Biotope Award ceremony held by the Japan Biotope Association. * Formerly the Carbon Disclosure Project, CDP is an NPO based in the UK which researches and evaluates how companies and cities are working to address environmental issues related to climate change, water, forests, etc., and provides the information and results to investors. It began as a project to disclose companies’ environmental strategy and performance in response to demand from institutional investors. The CDP is now one of the most trusted evaluation organizations among investors. It issues evaluations on a 9-rank scale of A, A–, B, B–, C, C–, D, D–, and F.

Operational safety To achieve safe operations, it is essential to build highly safe plants based on process hazard assessment prior to construction, to perform sound plant maintenance, and to operate facilities in a stable and safe manner. The Asahi Kasei Group avoids operational accidents through risk assessments prior to the construction of new plants, periodic inspections of existing plants performed by auditors specialized in fire and explosion prevention, process reviews from the perspective of preventing abnormal reactions and ensuring interlock functions, and process reviews corresponding to the age of facilities. In fiscal 2013, we completed a program of on-site confirmation to identify hazards from the perspective of preventing abnormal reactions and ensuring interlock functions. From fiscal 2013 onwards, we have been preparing technical documents on items with a high degree of hazard and on accidents and problems which occurred in the past. From fiscal 2015, we

are implementing education and training for managers and operators to enable them to properly identify the cause and take appropriate action if problems occur, including problems that have not been previously encountered. There were no serious operational accidents inside or outside Japan during fiscal 2016.

Workplace safety and hygiene The effort to prevent workplace accidents is integrated in a comprehensive OHSMS* program that combines conventional safety initiatives—such as tidiness/orderliness/ cleanliness, reporting of near-accidents and potential hazards, hazard prediction analysis, safety patrols, and case studies—with risk assessments and a prevention-oriented plan-do-check-act (PDCA) system.

Occurrence of workplace injuries

Incidence of lost-workday injury by event category, FY2016 in Japan

Incidence of lost-workday injury by event category, FY2006–2015 in Japan

Total 18 cases

Total 122 cases

Integration of workplace safety initiatives Conventional safety initiatives

Risk assessments

PDCA management system

OHSMS * Occupational Health and Safety Management System. A standardized system used to confirm that continuous improvement is being applied to measures to minimize the risks of workplace injuries and to prevent the emergence of future risks.

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Fall on same level Kickback/overexertion Traffic accident Contact with high-temperature substance/object Caught in something else Caught in/between machinery Hit by flying/falling object Collision Contact with harmful substances Others

22% 17% 11% 11% 11% 6% 6% 6% 6% 4%

Traffic accident Fall on same level Fall from height Caught in/between machinery Kickback/overexertion Contact with high temperature substance/object Caught in something else Hit by flying/falling object Collision Others

24% 20% 13% 12% 12% 5% 3% 2% 2% 7%

For more information, please refer to the Asahi Kasei Group CSR website. http://www.asahi-kasei.co.jp/asahi/en/csr/

Health maintenance The Asahi Kasei Group implements various activities to help employees maintain and advance their mental and physical well-being in accordance with its health management guidelines, including screening for lifestyle-related diseases and mental health checkups.

Enhanced health management framework During fiscal 2016, interviews to monitor the effectiveness of the health management centers were performed at 7 sites. The series of interviews were launched in fiscal 2014 to confirm whether the activities at each site, including the duties of our

industrial physicians and health nurses, are being performed in accordance with the Industrial Safety and Health Law and our health management guidelines. Further guidance and support is being provided as necessary.

Quality assurance Upon our transition to an operating holding company configuration in April 2016, we established a new Asahi Kasei Group Quality Policy and Group Quality Assurance Bylaws. At the same time, Corporate ESH & QA was reorganized, including the establishment of a new Quality Assurance Group to coordinate the reinforcement of quality assurance activities throughout the Asahi Kasei Group, ensuring the provision of safe and reliable products to our customers. In fiscal 2016, we once again met our target of no serious product safety incidents.

Asahi Kasei Group Quality Policy The Asahi Kasei Group creates and provides products and services with the quality to meet the needs of customers and society and ensure safety and security.

Reinforcing the quality assurance system: maintaining zero serious product safety incidents ■ Consumer satisfaction and safety Products and services provided by the Asahi Kasei Group include materials, products, installations, various services, and after-sale support. We believe that providing products and services that satisfy our customers is our ultimate mission. We constantly strive to enhance our systems for quality assurance, including product safety.

■ Effort to maintain zero serious product safety incidents As part of the effort to prevent serious product safety incidents, we established new quality assurance bylaws that stipulate quality assurance activities for RC administrators to perform. The bylaws newly define the central role of quality assurance managers in activities to enhance quality assurance, and are applied in concert with our product safety guidelines to secure product safety and prevent the occurrence of serious product safety incidents. All business units of the Asahi Kasei Group apply these uniform bylaws and guidelines to assure the quality of products and services.

Managing chemical substances To ensure the safety of products and production processes in the Asahi Kasei Group, we maintain awareness of the properties of the chemical substances we use, and manage them strictly and appropriately throughout each phase from materials procurement to production (including intermediates), use, and disposal.

The Asahi Kasei Group’s effort Strict management and control of chemical substances is a key element in the effort to ensure environmental protection, operational safety, workplace safety and hygiene, health maintenance, and product safety. Chemical substances are managed at each stage from development to use and disposal. The management of chemical substances begins with R&D, which is guided throughout every stage by a commitment to developing products and processes characterized by safe, environmentally sound production, handling, and use.

Industry-wide initiatives Joint Article Management Program (JAMP)

development of systems to manage chemical substance information as well as revision of the list of applicable substances. We also convey relevant information throughout the supply chain to help establish JAMP as a widely used tool. In fiscal 2016, we started to use a tool of information transmission compatible with chemSHERPA, a new scheme by the Ministry of Economy, Trade and Industry. We are working to smoothly transition from JAMP to chemSHERPA during the two-year period starting in fiscal 2016. As a major upstream company, we will continue to work with the JAMP Office toward the greater adoption of the JAMP-IT platform as a means of information sharing.

As an active member of JAMP, we participate in the Asahi Kasei Report 2017

57

Respect for Employee Individuality CSR Fundamentals

The Asahi Kasei Group considers fulfilling and satisfying working conditions and workplace culture, in which personnel feel motivated to achieve and take pride in their career, to be key to business performance.

Our human resources policies are focused on the maintenance and reinforcement of a corporate culture emphasizing Asahi Kasei characteristics, the personal growth of each employee, and the creation and expansion of business through superior people and organizations, based on the understanding that the exceptional power of our people and organizations is the source of our competitive strength.

Human Resources Principles The Human Resources Principles of the Asahi Kasei Group are a distillation of the values and beliefs held in common by all employees, a key aspect of a corporate culture where personal growth and corporate development are mutually reinforcing.

Corporate Commitment

Basic Expectations

The basic commitment to human resources is to provide the venue for a dynamic and fulfilling career as a part of a lively and growing corporate group.

• Enterprise and growth through challenge and change • Integrity and responsibility in action • Respect for diversity

Human resource development A wide range of training programs Employees are given a wide range of training to develop the skills needed to successfully advance their careers. A regular program of training is applied at key career stages beginning with hiring and extending through promotion to managerial positions. Other individual training programs such as for global management are implemented according to business need. Each core operating company also implements training programs to support the development of employee skills required for its specific field of business. Group Masters The Asahi Kasei Group employs a “Group Masters” program to recognize employees who have developed and exercised extraordinary expertise and skills that hold universal value, and to facilitate their application throughout the Group. As of May 2017, 88 Group Masters are designated: 30 as Senior Group Experts and

Expectations of Leaders • Building the team, heightening performance and achievement • Going beyond conventional boundaries, in thought and action • Contributing to mutual development and growth

58 as Group Experts, with rank and remuneration commensurate with general manager and section manager, respectively. To accelerate the creation of new businesses as a basic strategy of the “Cs for Tomorrow 2018” management initiative, we revised the system in fiscal 2017 for greater emphasis on the development and growth of engineers and technical personnel. The program is focused on reinforcing the specialized technical abilities of such personnel who will drive the creation of new businesses and the enhancement of established businesses. Development of global human resources To accelerate the expansion of world-leading businesses in accordance with the medium-term management initiative “Cs for Tomorrow 2018” from the perspective of human resources, we are implementing measures such as internship programs for young personnel, and holding training sessions for personnel at overseas subsidiaries on subjects such as dissemination of corporate philosophy, intercultural communication, and management training.

Valuing human rights and diversity Basic policy Human Resources leads the effort to ensure that there will be no discrimination to maintain a lively workplace culture which enables personnel to perform at their best, to advance employment of persons with disability, and to rehire personnel after mandatory retirement. To prevent any harassment or discrimination, we implement training on corporate ethics to employees at each level—new hires, assistant managers, and managers. Ethics training is also implemented by business unit and by geographical area.

Hiring The Asahi Kasei Group is working to create new value for

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society by enabling living in health and comfort and harmony with the natural environment. We strive to hire motivated and capable personnel who will successfully execute our strategy on a global scale. We continue to hire university graduates of foreign nationality every year, and the overall makeup of our personnel is becoming more global. We are also strengthening our ties to universities both in Japan and overseas, through career briefing sessions and student internships, as part of an ongoing effort to attract talent. In April 2017, 379 new graduates were hired: 296 men and 83 women. In addition, 108 persons were hired in mid-career between April 2016 and March 2017.

For more information, please refer to the Asahi Kasei Group website. http://www.asahi-kasei.co.jp/asahi/en/csr

Expansion of opportunities for women

Employment of persons with disabilities

In 1993, we established a dedicated corporate organ (now Diversity Promotion Group) to promote equal opportunity, and have proactively increased the proportion of women hired and expanded the distribution of job assignments for women. While only five employees at the rank of manager or above were women in 1993, this has risen to 534 in June 2017. To support female personnel in their careers, we provide a mentoring program, hold seminars on returning to work after maternity leave, and publish diversity-related articles in our internal magazine.

Asahi Kasei Ability Corp. was established in 1985 for the employment of persons with disabilities, performing a wide range of services for the Asahi Kasei Group. The employment rate at applicable companies of the Asahi Kasei Group was 2.19% (550.0 persons) as of June 1, 2017, exceeding the legal requirement. We continue recruitment activities to further increase the employment of persons with disabilities at group companies other than Asahi Kasei Ability.

Number of women as managers*

Asahi Kasei Group

400

370

410

454

Legal minimum

(%)

600 500

Rate of employment of persons with disabilities at applicable Group companies*

500

2.19

2.2

534

2.1

2.12

2.08

2.12 2.05

2.0

300

2.00

1.9

200

1.8

100 0

’13/6

’14/6

’15/6

’16/6

1.7

’17/6

* Results as of June 30 each year for personnel employed by Asahi Kasei Corp., Asahi Kasei Microdevices Corp., Asahi Kasei Homes Corp., Asahi Kasei Construction Materials Corp., Asahi Kasei Pharma Corp., and Asahi Kasei Medical Co., Ltd. (Asahi Kasei Chemicals Corp., Asahi Kasei Fibers Corp., Asahi Kasei E-materials Corp. are included through June 2015).

’13/6

’14/6

’15/6

’16/6

’17/6

* Results as of June 1 each year at applicable Group companies. Calculation based on total employment of 25,073 persons in the 21 applicable companies. As of June 1, 2017, the number of persons with disabilities employed by Asahi Kasei Ability Corp. stood at 333 of the total 550 employees with disabilities. Calculated in accordance with the Act on Employment Promotion etc. of Persons with Disabilities.

Balancing work and family life Basic policy

Shortened working hours for child care

We provide various forms of support for personnel to work with security and vitality in accordance with their individual circumstances and values from the perspective of balancing work and family life.

Personnel are able to utilize shortened working hours to care for preschoolers, with the working day shortened by up to 2 hours until the child enters elementary school. In September 2007, a provision called “Kids Support” was added to enable personnel with children in the first and second grades to work shortened hours as well. These provisions may be used concurrently with a “flex-time” system for flexible working hours.

Parental leave Our parental leave is available through the fiscal year in which the child turns three years old. In fiscal 2016, parental leave was utilized by 582 personnel. This included 316 men, 43% of those who were qualified, and 266 women. Employees using parental leave* Women 330

220

Men

316

212

242

235 233

226 231

240

316 266

As globalization continues to advance, an increasing number of personnel have a spouse who is transferred to an overseas assignment. In fiscal 2013 we adopted a provision for such personnel to take a leave of absence to accompany their spouses living overseas. In fiscal 2016, 16 personnel utilized this provision.

Platinum Kurumin certification mark

110

0

Leave to accompany spouse overseas

’12

’13

’14

’15

’16

(FY)

* Results as of June 30 each year for personnel employed by Asahi Kasei Corp., Asahi Kasei Microdevices Corp., Asahi Kasei Homes Corp., Asahi Kasei Construction Materials Corp., Asahi Kasei Pharma Corp., and Asahi Kasei Medical Co., Ltd. (Asahi Kasei Chemicals Corp., Asahi Kasei Fibers Corp., and Asahi Kasei E-materials Corp. included through June 2015).

In 2016, we received the Platinum Kurumin certification mark from the Ministry of Health, Labor and Welfare.* Platinum Kurumin certification is awarded in recognition of proactive support for the development of the next generation which is superior to the previously received Kurumin certification. * Certification received for Asahi Kasei Corp., Asahi Kasei Homes Corp., Asahi Kasei Microdevices Corp., Asahi Kasei Pharma Corp., Asahi Kasei Medical Co., Ltd., and Asahi Kasei Ability Corp. Asahi Kasei Ability Corp. is the first company in Miyazaki Prefecture to receive Platinum Kurumin certification.

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Corporate Citizenship We are committed to advancing in harmony with society from a global perspective through fair information disclosure and the proactive employment of management resources for corporate responsibility and citizenship.

CSR Fundamentals

Stakeholder dialog Different corporate organs hold responsibility for fair and open dialog with each of our different groups of stakeholders.

Stakeholders Corporate Communications at Asahi Kasei Corp. • Issuing news releases • Holding news conferences • Issuing documents for information disclosure • Website disclosure of information • Responding to CSRrelated questionnaires • Promoting social contribution activities

Communications sections at core operating companies • Issuing news releases • Holding news conferences • Website disclosure of information

Customers

Shareholders, investors

Suppliers

Local communities

Marketing and sales departments, consumer contact offices

Investor Relations at Asahi Kasei Corp.

Purchasing and logistics sections, environment and safety sections at production sites

General affairs and administration sections at production sites

• Face-to-face discussion by marketing and sales personnel • Taking inquiries via telephone, website, etc.

Customer relations

• Meeting with securities analysts and institutional investors • Seminars for Individual investors • Website disclosure of information • Taking inquiries via telephone, website, etc.

Investor Relations

• Safety discussion forums • Information exchange forums

Principled supplier relationships

• Periodic community dialog meetings •C  ommunity outreach initiatives

Public outreach

Asahi Kasei Group

Customer relations We believe that it is by maintaining customer satisfaction that our products and services contribute to society. For materials, intermediates, and devices, communication with our customers is handled by the sales and technical support departments of each business unit. For end products and housing, communication with our customers is handled by the customer support center of each product.

Investor Relations We strive to disclose information in a timely and fair manner to enable our domestic and international investors to gain an accurate understanding of the Asahi Kasei Group.

Shareholder distribution Information on shareholder distribution is available in the Corporate Citizenship section of our CSR website.

were held overseas. We also provide a wide variety of information for investors on our website.

Seminars for individual investors IR meetings with institutional investors and securities analysts In fiscal 2016, Investor Relations (IR) held 210 meetings with institutional investors and securities analysts in Japan, including quarterly results briefings and an annual management briefing with the President. To deepen understanding of Asahi Kasei among investors, we held a briefing on the Material sector as well as individual meetings. In addition, 79 meetings

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Asahi Kasei Report 2017

To provide individual investors with a better understanding of the operations of the Asahi Kasei Group, 5 seminars were held in fiscal 2016. We will continue to provide accurate and timely information to individual investors through direct communications, the corporate website, and articles published in magazines for individual investors.

For more information, please refer to the Asahi Kasei Group website. http://www.asahi-kasei.co.jp/asahi/en/csr

Principled supplier relationships A relationship of mutual trust with our suppliers is fostered through fair and principled purchasing practices based on regulatory compliance and respect for the environment and human rights. Purchasing departments throughout the Asahi Kasei Group regard suppliers as important partners and work to build relationships with them based on sincerity in accordance with our Group Philosophy. To this end, we are placing greater

emphasis on CSR in accordance with our Procurement Policy. Each year we conduct a survey of suppliers to help foster greater awareness of the importance of CSR issues.

Public outreach We work to honor and respect the local culture of each community where our operations are based, and to maintain effective dialog and communication with community members. Many of our major plants offer plant tours to provide the local community with a better understanding of our operations and the measures we implement for the environment and safety. Measures for community dialog and interaction include regularly held forums and meetings with representatives of

local governments and members of local residents associations. We also open our gymnasiums, sports fields, parking lots, and other facilities for public use and enjoyment, and host a variety of events.

Community fellowship The Community Fellowship Committee is organized under direct supervision of the President of Asahi Kasei. Its roles include formulation of overall policy, plans, and courses of action in regard to community fellowship activities. The Committee also monitors and reviews community fellowship activities at each site and at each affiliated company of the Asahi Kasei Group. Under our Community Fellowship Policy, we are involved in a wide range of community-focused activities in accordance with the three themes of Nurturing the Next Generation, Coexistence with the Environment, and Promotion of Culture, Art, and Sports. We participate in the One-Percent Club of the Keidanren (Japan Business Federation), and convert our social contribution activities into monetary value by a method set forth in its annual Survey of Expenditure for Corporate Philanthropic Activities. In fiscal 2015, this was ¥1.133 billion.

Coexistence with the Environment In addition to our afforestation activities in Miyazaki and Shizuoka, we participate in an afforestation project in the Horqin Desert of Inner Mongolia, China. We also exhibit at environmental-related events, and work to raise understanding of environmental issues.

Nurturing the Next Generation To promote understanding and heighten interest in science and technology among elementary, junior high, and high school students, we visit schools and host visits by students to factories to give explanations and demonstrations of science and technology and on environmental issues. We also support career development with occupational lectures and host visits by junior high and high school students to our corporate head office. Such activities were held 81 times in fiscal 2016, with a total of some 3,408 students of 83 schools participating. In August 2016, we held a laboratory tour for female high school students, together with informal discussion with our researchers, as part of our effort to foster interest in careers in science and technology among young women. We also sponsor educational events including science competitions and environmental education programs organized by newspaper companies, exhibit at science and chemistry events, and have a partnership with the National Museum of Emerging Science and Innovation (Miraikan).

Disaster relief We participate in a Disaster Relief Market featuring produce of the areas affected by the Great East Japan Earthquake. We also supported the relief effort in areas affected by the July 2017 flooding in northern Kyushu by making donations of ¥5 million each to the government of Oita Prefecture and to the Community Chest of Fukuoka.

Promotion of Culture, Art, and Sports Members of our corporate distance running and judo teams have competed in the Olympics a total of some 50 times. In Nobeoka, Miyazaki, where the teams are based, we host a major track event, and hold running and judo lessons for the local youth. The Asahi Kasei Himuka Cultural Foundation was established in 1985 to enrich the environment of day-to-day life and culture in Miyazaki Prefecture, with a wide range of cultural activities being held. Asahi Kasei Report 2017

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Asahi Kasei Report 2017

Financial Section

Contents 64 Management’s Discussion and Analysis 70 Risk Analysis 72 Consolidated Financial Statements 72 Consolidated Balance Sheets 74 Consolidated Statements of Income 75 Consolidated Statements of Comprehensive Income 76 Consolidated Statements of Changes in Net Assets 77 Consolidated Statements of Cash Flows 78 Notes to Consolidated Financial Statements 78  1. Major policies for preparing the consolidated financial statements 78   2. Significant accounting policies 79   3. Changes in significant accounting policies 80   4. Notes to Consolidated Balance Sheets 81   5. Notes to Consolidated Statements of Income 83   6. Notes to Consolidated Statements of Comprehensive Income 83   7. Notes to Consolidated Statements of Changes in Net Assets 85   8. Notes to Consolidated Statements of Cash Flows 85   9. Leases 86 10. Financial instruments 89 11. Marketable securities and investment securities 90 12. Derivative financial instruments 93 13. Provision for retirement benefits 95 14. Taxes 96 15. Business combinations 97 16. Asset retirement obligations 97 17. Business segment information 100 18. Information on related parties 101 19. Per share information 102 20. Borrowings 102 21. Others 103 Independent Auditor’s Report

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Management’s Discussion and Analysis Fiscal year 2016 (April 1, 2016 – March 31, 2017)

Operating Environment

Non-operating income and expenses, ordinary income Net non-operating income was ¥1.4 billion, a ¥5.2 billion improvement from the ¥3.8 billion net non-operating expenses of a year earlier. Foreign exchange loss transitioned to foreign exchange gain, and equity in losses of affiliates decreased. As a result, ordinary income decreased by ¥0.7 billion (0.5%) to ¥160.6 billion.

During fiscal 2016, the outlook for the global economy remained obscure with increased political uncertainty related to the withdrawal of the UK from the EU and increased concern regarding the economic policy of the new US administration, as well as concern of economic slowdown in emerging economies. Meanwhile, the Japanese economy continued on a path of gradual recovery with strong corporate performance while consumer spending became firm as the employment situation and income environment improved.

Extraordinary income and loss Extraordinary income of ¥10.1 billion included ¥9.9 billion in gain on sales of investment securities. Extraordinary loss of ¥13.3 billion included ¥6.2 billion in business structure improvement expenses, ¥4.9 billion in loss on disposal of noncurrent assets, ¥1.5 in impairment loss, and ¥0.7 billion in business integration expense. The net extraordinary loss of ¥3.2 billion was ¥11.7 billion lower than a year ago.

Overview of Consolidated Results Net sales, operating income Consolidated net sales for the fiscal year decreased by ¥57.9 billion (3.0%) to ¥1,883.0 billion. Overseas sales decreased by ¥23.4 billion (3.4%) to ¥656.4 billion, largely in the Material segment, and decreased by 0.2 percentage points as a portion of consolidated net sales from 35.0% to 34.9%. Domestic sales decreased by ¥34.6 billion (2.7%) to ¥1,226.6 billion with lower deliveries of order-built homes in the Homes segment and lower reimbursement prices for pharmaceuticals in the Health Care segment. Operating income decreased by ¥6.0 billion (3.6%) to ¥159.2 billion. As a percentage of net sales, cost of sales decreased by 1.0 percentage points to 68.8%. Selling, general and administrative (SG&A) expenses increased by ¥6.5 billion despite the decrease in net sales, increasing as a portion of net sales by 1.0 percentage points to 22.7%. Operating margin decreased by 0.1 percentage points to 8.5%.

Net Sales, Overseas Sales Ratio

Operating Income, Operating Margin

Net Income Attributable to Owners of the Parent, Net Income per Share

SG&A, SG&A Ratio

(¥ billion)

(%)

(¥ billion)

(%)

(¥ billion)

(%)

(¥ billion)

2,000

40

200

20

500

50

120

100

400

40

1,500

30

150

15

90

75

300

30 60

50

30

25

20

1,000

500

10

0

0

’12

’13

’14

’15

’16

Net sales (left scale) Overseas sales ratio (right scale)

64

Net income attributable to owners of the parent With ordinary income of ¥160.6 billion and net extraordinary loss of ¥3.2 billion, income before income taxes was ¥157.4 billion. Income tax expense was ¥40.7 billion (current income taxes of ¥49.0 billion less deferred income taxes of ¥8.3 billion). Net income attributable to non-controlling interests was ¥1.7 billion. As a result, net income attributable to owners of the parent increased by ¥23.2 billion (25.3%) to ¥115.0 billion, and net income per share increased by ¥16.65 to ¥82.34 from the ¥65.69 of the previous year.

Asahi Kasei Report 2017

(FY)

10

100

200

20

100

10

5

50

0

0

’12

’13

’14

’15

’16

Operating income (left scale) Operating margin (right scale)

(FY)

0

0

’12

’13

’14

’15

SG&A (left scale) SG&A ratio (right scale)

’16

(FY)

(¥)

0

0

’12

’13

’14

’15

’16

(FY)

Net income attributable to owners of the parent (left scale) Net income per share (right scale)

Results by Operating Segment In April 2016, the Asahi Kasei Group reorganized its business portfolio together with the beginning of a new strategic management initiative. The previous four reportable segments of Chemicals & Fibers, Homes & Construction Materials, Electronics, and Health Care, together with an “Others” category, have been changed to the three reportable segments of Material, Homes, and Health Care, together with an “Others” category. The figures for the year-ago period have been recalculated in accordance with the new segment configuration for comparison purposes. Material Sales decreased by ¥31.3 billion (3.1%) from a year ago to ¥973.2 billion, and operating income increased by ¥5.3 billion (6.6%) from a year ago to ¥84.5 billion. In fibers & textiles, shipments of Bemberg™ cupro fiber, Lamous™ artificial suede, and Leona™ nylon 66 filament increased, but selling prices declined due to competition, and each product in fibers & textiles operations was impacted by the stronger yen. Among chemical operations, in petrochemicals, shipments of styrene decreased following the strengthening of petrochemical operations in Japan, while terms of trade improved for acrylonitrile. Shipments of synthetic rubber for fuel-efficient tires and engineering plastics increased, but each product in performance polymers was impacted by the stronger yen. In performance materials and consumables, ion-exchange membranes were impacted by the stronger yen, but sales of electronic materials and Saran Wrap™ cling film were firm.

Fibers Business Operating Income Increases/Decreases

Among electronics operations, shipments of each battery separator product increased. While results of Polypore, consolidated from the second quarter of fiscal 2015, were included, amortization of goodwill, etc., was recorded for the full year, and the stronger yen had an impact. In electronic devices, shipments of audio devices for smartphones increased but the stronger yen had an impact. Homes Sales decreased by ¥13.5 billion (2.1%) from a year ago to ¥619.0 billion, and operating income decreased by ¥6.9 billion (9.7%) from a year ago to ¥64.1 billion. Among homes operations, in order-built homes, deliveries of Hebel Haus™ unit homes and Hebel Maison™ apartment buildings decreased as an effect of orders received during the previous period, while SG&A expenses such as advertising expenses increased. In remodeling, SG&A expenses such as labor costs increased, but in real estate, management of rental units was firm. In construction materials operations, sales of Neoma™ phenolic foam insulation panels were firm, while shipments of autoclaved aerated concrete (AAC) and foundation systems decreased.

Chemicals Business Operating Income Increases/Decreases

Electronics Business Operating Income Increases/Decreases

(¥ billion)

(¥ billion)

(¥ billion)

20

80 Sales volume +2.2

15 13.9

Sales prices1 –3.0

Sales volume +5.0

60

Foreign exchange2 –2.8

40

Excluding impact of foreign exchange Impact of foreign exchange on sales prices

Foreign exchange2 –4.6 4.4

3

0

’16

1 2

Operating costs and others +1.1

2.5

0

’15

(FY)

Sales prices1 –6.2

9

Foreign exchange2 –22.2

20

0

2

12

6

5

’15

Sales volume +7.7

70.4

Sales prices1 –12.6

Operating costs and others +1.4

1

15

60.9

11.7

10

Operating costs and others +39.1

Excluding impact of foreign exchange Impact of foreign exchange on sales prices

’16

’15

(FY) 1 2

’16

(FY)

Excluding impact of foreign exchange Impact of foreign exchange on sales prices

Asahi Kasei Report 2017

65

Management’s Discussion and Analysis

Others Sales increased by ¥2.1 billion (11.2%) from a year ago to ¥20.7 billion, and operating income increased by ¥2.3 billion (59.8%) from a year ago to ¥6.0 billion.

Health Care Sales decreased by ¥15.3 billion (5.4%) from a year ago to ¥270.1 billion, and operating income decreased by ¥4.3 billion (11.9%) from a year ago to ¥31.9 billion. Shipments of Teribone™ osteoporosis drug and Recomodulin™ recombinant thrombomodulin increased, but pharmaceuticals operations were impacted by reduced reimbursement prices, and Flivas™ agent for treatment of benign prostatic hyperplasia was impacted by competition from generics. Shipments of Planova™ virus removal filters increased, but medical devices operations were impacted by the stronger yen and, in Japan, by reduced reimbursement prices for dialysis-related products. In critical care operations, on a local-currency basis, the LifeVest™ wearable defibrillator business continued to expand well, and sales of other products such as defibrillators and related accessories increased, but SG&A expenses grew with reinforced sales activity. The higher exchange value of the yen had an impact on the translation of results into consolidated accounts.

Homes Business Operating Income Increases/Decreases

Construction Materials Business Operating Income Increases/Decreases

Health Care Business Operating Income Increases/Decreases

(¥ billion)

(¥ billion)

(¥ billion)

80

6.0

65.4

Sales volume –1.5

Sales prices +1.9

60

5.8

Operating costs and others –6.4

Sales volume –0.9

30 Sales prices –0.5

4.5

59.5

Operating costs and others 0

24

24.3

Sales prices1 –7.5

4.5 Foreign exchange2 –3.6

18 40

Sales volume +1.2

17.1

3.0 Operating costs and others +2.6

12 20

1.5 6

0

0

’15

’16

(FY)

0

’15

’16

’15

(FY) 1 2

66

Asahi Kasei Report 2017

Excluding impact of foreign exchange Impact of foreign exchange on sales prices

’16

(FY)

Liquidity and Capital Resources Financial position Total assets at fiscal year end were ¥2,254.5 billion, ¥42.8 billion (1.9%) higher than a year earlier. Current assets increased by ¥38.5 billion (4.5%) to ¥894.5 billion, mainly as notes and accounts receivable–trade increased by ¥22.7 billion and inventories increased by ¥9.9 billion. Noncurrent assets increased by ¥4.2 billion (0.3%) to ¥1,360.0 billion, notably with a ¥39.5 billion increase in investment securities while there was a ¥31.8 billion decrease in intangible assets. Current liabilities decreased by ¥130.8 billion (18.0%) to ¥594.9 billion, mainly as a result of a ¥200.1 billion decrease in short-term loans payable and a ¥16.5 billion decrease in income taxes payable, while there was a ¥56.0 billion increase in commercial paper. Although bonds payable decreased by ¥20.0 billion, noncurrent liabilities increased by ¥62.8 billion (14.7%) to ¥491.5 billion with a ¥98.0 billion increase in long-term loans payable. Interest-bearing debt decreased by ¥46.8 billion (10.4%) to ¥402.8 billion.

Net assets increased by ¥110.7 billion (10.5%) from ¥1,057.4 billion to ¥1,168.1 billion. While dividend payments were ¥27.9 billion, net income attributable to owners of the parent was ¥115.0 billion. As a result, net worth per share increased by ¥78.42 to ¥824.36, net worth to total assets increased from 47.1% to 51.1%, and debt-to-equity ratio decreased by 0.08 points to 0.35.

Critical Care Business Operating Income Increases/Decreases

Others Operating Income Increases/Decreases

(¥ billion)

(¥ billion)

20

Sales volume +5.8 Sales prices1 +1.9

15

Foreign exchange2 –0

2,500

6.0 Operating costs and others +0.4

4.5

14.8

(¥ billion)

Sales volume +1.9

6.0

Operating costs and others –4.8

2,000

3.8

11.9

10

Total Assets, Net Worth

1,500

3.0 1,000

5

1.5 500

0

0

’15 1 2

Excluding impact of foreign exchange Impact of foreign exchange on sales prices

’16

(FY)

0

’15

’16

(FY)

’12

’13

’14

’15

’16

(FY)

Total assets Net worth

Asahi Kasei Report 2017

67

Management’s Discussion and Analysis

Capital Expenditure



Capital expenditure (capex) was primarily for new and expanded production plant and equipment in long-term growth fields. Investments were also made for rationalization, labor-saving, maintenance, and IT systems to bring greater product reliability and cost reductions. The following table of capex by operating segment shows totals of property, plant and equipment and intangible assets (other than goodwill), excluding consumption tax. A total of ¥90.6 billion was invested during the fiscal year for the expansion of businesses with competitive superiority, particularly in the Material segment, as well as for modification and rationalization. Totals for the year (¥ million)

Compared to previous year (%)

Material

47,205

82.5

Homes

12,139

101.6

Health Care

15,604

80.5

6,836

145.3

81,783

87.7

8,790

152.1

90,573

91.5

Others Combined Corporate assets and eliminations Consolidated

Interest-Bearing Debt, D/E Ratio

Net Worth to Total Assets

Material

Construction of a new production line for Hipore™ lithium-ion battery separator, construction of a new production facility for Bemliese™ continuous-filament cellulose nonwoven, rationalization, laborsaving, and maintenance.

Homes

Rationalization, labor-saving, and maintenance.

Health Care

Construction of a new manufacturing facility for the active ingredient of Recomodulin™ thrombomodulin agent, construction of a new plant for the spinning of hollow-fiber membranes for Planova™ BioEX virus removal filters, rationalization, labor-saving, and maintenance.

Others

Rationalization, labor-saving, and maintenance.

Corporate assets

R&D equipment, IT systems, and maintenance.

Capex, Depreciation and Amortization

(%)

(¥ billion)

60

500

1.0

400

0.8

50

Notable capex by operating segment was as follows.

(¥ billion)

120

90 40 0.6

300 30

60 200

0.4

100

0.2

20 30 10

0

0

’12

’13

’14

’15

’16

(FY)

0

’12

’13

’14

’15

’16

Interest-bearing debt (left scale) D/E ratio (right scale)

68

Asahi Kasei Report 2017

(FY)

0

’12

’13

’14

’15

’16

Capex Depreciation and amortization

(FY)

Cash Flows Free cash flows* were a positive ¥79.0 billion, as cash provided, principally from income before income taxes and from depreciation and amortization, exceeded cash used, principally for purchase of property, plant and equipment, and for payment of income taxes. Cash flows from financing activities were a net ¥74.0 billion used, principally due to a decrease in shortterm loans payable. As a result, cash and cash equivalents at fiscal year end were ¥144.1 billion, ¥1.2 billion less than a year earlier. Cash flows from operating activities Cash used included ¥61.4 billion for income taxes paid and a ¥20.8 increase in notes and accounts receivable–trade. Income before income taxes provided ¥157.4 billion, and depreciation and amortization provided ¥91.4 billion. Net cash provided by operating activities was ¥169.0 billion, ¥47.3 billion less than a year earlier. Cash flows from investing activities Cash provided included ¥12.0 billion in proceeds from sales of investment securities. Cash used included ¥83.0 billion for purchase of property, plant and equipment, ¥9.8 billion for purchase of investment securities, and ¥8.8 billion for purchase of intangible assets. Net cash used in investing activities was ¥89.9 billion, ¥195.4 billion less than a year earlier.

Free Cash Flows

Cash Flows

(¥ billion)

(¥ billion)

160

Cash flows from financing activities Cash provided included ¥138.8 billion in proceeds from longterm loans payable, and a ¥56.0 increase in commercial paper. Cash used included a ¥193.8 billion decrease in short-term loans payable, ¥45.5 billion for repayment of long-term loans payable, and ¥27.9 billion in cash dividends paid. Net cash used in financing activities was ¥74.0 billion, ¥175.3 billion more than a year earlier. * Total of net cash provided by (used in) operating activities and net cash provided by (used in) investment activities.

Financial Policy We aim to increase free cash flows with increased earnings through enhanced cost efficiency, greater product competitiveness, and business structure improvements, and with greater capital efficiency through utilization of group finance and maintenance of optimum inventory levels. A wide range of fund-raising methods including bank borrowings, bonds, and commercial paper will be utilized dynamically in accordance with the financial circumstances of the Asahi Kasei Group in order to obtain stable financing at low cost. These resources will be used to fund strategic investments under the “Cs for Tomorrow 2018” strategic management initiative focused on the pursuit of growth and profitability, creation of new businesses, and acceleration of globalization, as well as dividends for shareholders. Advancing these measures will enable us to further enhance corporate value and provide an appropriate return to shareholders while maintaining discipline for a sound financial constitution.

300

120

200

80 100

40 0

0

(40)

(100)

(80) (200)

(120) (160)

(300)

’12

’13

’14

’15

’16

(FY)

’12

’13

’14

’15

’16

(FY)

Net cash provided by operating activities Net cash used in investing activities Net cash provided by (used in) financing activities Asahi Kasei Report 2017

69

Risk Analysis

Operating risks and non-operating risks which may materially influence investor decisions are described below. The management maintains awareness of the possibility that these scenarios may emerge and, to the fullest possible extent, implements measures to avoid their emergence and to minimize their impact on corporate performance in the event that they do emerge. The description of risks given here includes elements which may emerge in the future, but as it is based on current evaluations as of June 28, 2017, it does not include risks which could not be foreseen.

Crude oil and naphtha prices Operating costs in operations based on petrochemicals are affected by prices for crude oil and naphtha. If crude oil and naphtha prices rise, selling prices for products derived from these feedstocks must be increased in a timely manner to maintain sufficient price spreads. Price spreads may diminish, thereby affecting our consolidated performance and financial condition. Exchange rate fluctuation The value of items denominated in currencies other than the yen is affected by the rate of exchange at the time of conversion to yen. Although measures such as currency exchange hedges are utilized to minimize the short-term effects of exchange rate fluctuations, such fluctuations may exceed the foreseeable range over the short to long term, thereby affecting our consolidated performance and financial condition. Overseas operations Overseas operations may face a variety of risks which cannot be foreseen, including the existence or emergence of economically unfavorable circumstances due to legal and regulatory changes, vulnerability of infrastructure, difficulty in hiring/retaining qualified employees, or other factors, and social or political instability due to terrorism, war, or other factors. Overseas operations may be impaired by such scenarios, thereby affecting our consolidated performance and business plans. Housing-related tax policy, interest rate fluctuation Operations in the Homes segment are affected by Japanese tax policies as they relate to home acquisition and by fluctuations in Japanese interest rates. Changes in Japanese tax policy, including consumption taxes, or fluctuations in Japanese interest rates may result in diminished housing demand, thereby affecting our consolidated performance and financial condition.

70

Asahi Kasei Report 2017

Profitability of electronics-related businesses The electronics industry is characterized by sharp market cycles. The profitability of electronics-related businesses may decline significantly in a relatively short time, thereby affecting our consolidated performance and financial condition. Because products in this field rapidly become obsolete, the timely development and commercialization of leading-edge devices and materials is required. New product development may be delayed, or demand fluctuations may exceed expectations, thereby affecting our consolidated performance and financial condition. Pharmaceutical, medical device, and critical care device businesses Pharmaceutical, medical device, and critical care device businesses may be significantly affected by government measures regarding health care or other changes in government policy in various countries. Unforeseeable side effects or complications may emerge, significantly affecting these businesses. Product approval may be withdrawn as a result of reexamination, and competition may intensify as a result of the market entry of generics. For products under development, regulatory approval may be prolonged or fail to be obtained, market demand may be lower than expected, and reimbursement prices may be lower than expected. Such scenarios may affect our consolidated performance and financial condition.

Industrial accidents and natural disasters The occurrence of a significant industrial accident or natural disaster at a plant or elsewhere may result in a loss of public trust, the emergence of costs associated with accident response, including compensation, and opportunity loss due to plant shutdown caused by damage to plant facilities, supply chain disruptions which impede raw materials procurement, etc., thereby affecting our consolidated performance and financial condition.

Business and capital alliances Acquisitions, business alliances, and capital alliances may bear lower results or less synergy than anticipated due to deterioration of the operating environment, thereby affecting our consolidated performance and financial condition. Poor performance at companies in which we have invested may require the recording of an impairment loss for goodwill, etc., thereby affecting our consolidated performance and financial condition.

Intellectual property, product liability, and legal regulation An unfavorable ruling may emerge in a dispute relating to intellectual property, a product defect resulting in a large scale recall and compensation whose costs exceed insurance coverage may emerge, and detrimental legal and regulatory changes may emerge in any country where we operate. Such scenarios may affect our consolidated performance and financial condition. Business counterparties The occurrence of misconduct or unforeseeable credit impairment, etc. may necessitate additional losses or allowances to be recorded in financial accounts, thereby affecting our consolidated performance and financial condition.

Asahi Kasei Report 2017

71

Consolidated Financial Statements Consolidated Balance Sheets Asahi Kasei Corporation and Consolidated Subsidiaries March 31, 2017 and 2016 Thousands of U.S. dollars (Note 1)

Millions of yen

ASSETS

2017

2016

2017

¥   145,289

¥   146,054

$   1,295,026

302,751

280,095

2,698,556

Current assets: Cash and deposits (Notes 8 and 10) Notes and accounts receivable—trade



1,534



Merchandise and finished goods

159,395

159,441

1,420,759

Work in process

116,481

108,684

1,038,248

Raw materials and supplies

70,806

68,618

631,126

Deferred tax assets (Note 14)

20,279

18,133

180,756

Other

81,816

75,324

729,263

Allowance for doubtful accounts

(2,272)

(1,865)

(20,251)

894,545

856,018

7,973,482

Short-term investment securities (Notes 8, 10 and 11)

Total current assets

Noncurrent assets: Property, plant and equipment: Buildings and structures (Notes 4 (b), (d)) Accumulated depreciation

508,713

495,817

4,534,388

(278,122)

(268,635)

(2,479,027)

230,590

227,183

2,055,353

1,376,029

1,348,103

12,265,166

(1,176,686)

(1,149,544)

(10,488,332)

199,343

198,559

1,776,834

Land (Note 4 (d))

62,391

61,046

556,119

Lease assets (Note 9)

12,367

12,928

110,233

(11,381)

(11,183)

(101,444)

Buildings and structures, net Machinery, equipment and vehicles (Notes 4 (b), (d)) Accumulated depreciation Machinery, equipment and vehicles, net

Accumulated depreciation Lease assets, net Construction in progress Other (Note 4 (d)) Accumulated depreciation

986

1,745

8,789

45,958

49,240

409,644

150,073

147,286

1,337,668

(132,460)

(129,072)

(1,180,676)

17,613

18,215

156,993

556,881

555,989

4,963,731

Goodwill

285,622

305,112

2,545,878

Other

177,149

189,470

1,579,009

Subtotal

462,772

494,582

4,124,895

284,137

244,598

2,532,641

18,918

16,353

168,625

9,309

20,098

82,975

28,154

24,280

250,949

(215)

(189)

(1,916)

340,302

305,140

3,033,265

Other, net Subtotal Intangible assets:

Investments and other assets: Investment securities (Notes 4 (a), (b), 10 and 11) Long-term loans receivable (Note 10) Deferred tax assets (Note 14) Other Allowance for doubtful accounts Subtotal Total noncurrent assets Total assets The accompanying notes are an integral part of these statements.

72

Asahi Kasei Report 2017

1,359,955

1,355,711

12,121,891

¥ 2,254,500

¥ 2,211,729

$ 20,095,374

Thousands of U.S. dollars (Note 1)

Millions of yen

LIABILITIES AND NET ASSETS

2017

2016

2017

¥  147,543 113,475 56,000 20,000 305 100,419 16,202 72,882 5,003 2,461 1,800 572 58,217 594,880

¥  126,653 313,587 — — 919 98,717 32,735 74,667 3,908 2,355 2,130 568 69,423 725,662

$ 1,315,117 1,011,454 499,153 178,269 2,719 895,080 144,416 649,630 44,594 21,936 16,044 5,098 518,914 5,302,433

20,000 192,584 467 59,759 165 4,390 2,162 178,368 3,436 20,479 9,695 491,506 1,086,385

40,000 94,632 537 64,930 558 7,228 2,171 186,300 3,480 20,131 8,702 428,669 1,154,330

178,269 1,716,588 4,163 532,659 1,471 39,130 19,271 1,589,874 30,627 182,539 86,416 4,381,014 9,683,439

103,389 79,443 850,532 (3,242)

103,389 79,410 763,076 (3,150)

921,553 708,111 7,581,175 (28,897)

1,030,122

942,724

9,181,941

113,475 55 40,831 (33,140) 121,222 16,771 1,168,115

92,280 (179) 48,429 (41,353) 99,177 15,498 1,057,399

1,011,454 490 363,945 (295,392) 1,080,506 149,487 10,411,935

¥2,254,500

¥2,211,729

$20,095,374

Liabilities: Current liabilities: Notes and accounts payable—trade (Note 10) Short-term loans payable (Notes 4 (b), 10 and 20) Commercial paper (Notes 10 and 20) Current portion of bonds payable (Notes 10 and 20) Lease obligations (Notes 9, 10 and 20) Accrued expenses Income taxes payable (Note 10) Advances received Provision for periodic repairs Provision for product warranties Provision for removal cost of property, plant and equipment Asset retirement obligations (Note 16) Other Total current liabilities Noncurrent liabilities: Bonds payable (Notes 10 and 20) Long-term loans payable (Notes 4 (b), 10 and 20) Lease obligations (Notes 9, 10 and 20) Deferred tax liabilities (Note 14) Provision for periodic repairs Provision for removal cost of property, plant and equipment Provision for loss on litigation Net defined benefit liability (Note 13) Asset retirement obligations (Note 16) Long-term guarantee deposits (Note 10) Other Total noncurrent liabilities Total liabilities

Net assets: Shareholders’ equity: Capital stock Authorized—4,000,000,000 shares Issued and outstanding—1,402,616,332 shares Capital surplus Retained earnings (Note 7 (b) (ii)) Treasury stock (2017—5,958,904 shares, 2016—5,861,678 shares) Total shareholders’ equity Accumulated other comprehensive income: Net unrealized gain on other securities Deferred gains or losses on hedges Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensive income Non-controlling interests Total net assets Commitments and contingent liabilities (Notes 4 (c) and 9) Total liabilities and net assets The accompanying notes are an integral part of these statements.

Asahi Kasei Report 2017

73

Consolidated Statements of Income Asahi Kasei Corporation and Consolidated Subsidiaries Years Ended March 31, 2017 and 2016 Thousands of U.S. dollars (Note 1)

Millions of yen

2017 ¥1,882,991

2016 ¥1,940,914

2017 $16,783,947

1,296,255

1,354,698

11,554,105

586,736

586,216

5,229,842

427,506

421,013

3,810,554

159,229

165,203

1,419,280

Interest income

1,425

1,417

12,702

Dividends income

5,170

4,757

46,083

Equity in earnings of affiliates

4,899



43,667

Other

3,854

5,148

34,352

15,347

11,322

136,795

4,435

3,611

39,531



854



Foreign exchange loss

1,228

3,679

10,946

Donations

3,930

851

35,030

Net sales (Note 17) Cost of sales (Note 5 (b)) Gross profit Selling, general and administrative expenses (Note 5 (a)) Operating income (Note 17) Non-operating income:

Total non-operating income Non-operating expenses: Interest expense Equity in losses of affiliates

4,351

6,159

38,782

13,944

15,154

124,289

160,633

161,370

1,431,794

9,918

8,275

88,404

165

917

1,471

10,083

9,192

89,874

101

363

900

Loss on disposal of noncurrent assets (Note 5 (d))

4,863

5,214

43,346

Impairment loss (Note 5 (e))

1,484

3,493

13,228

Business structure improvement expenses (Notes 5 (e), (f ))

6,189

3,606

55,165



1,201



Other Total non-operating expenses Ordinary income Extraordinary income: Gain on sales of investment securities Gain on sales of noncurrent assets (Note 5 (c)) Total extraordinary income Extraordinary loss: Loss on valuation of investment securities

Litigation settlement



1,456



690

1,547

6,150

Special retirement expenses and other



2,027



Loss on discontinuation of joint sales agreement (Notes 5 (e), (h))



5,266



Loss on piling business (Note 5 (g)) Business integration expense

Total extraordinary loss Income before income taxes Income taxes (Note 14) — current — deferred Total income taxes Net income Net income attributable to non-controlling interests Net income attributable to owners of the parent The accompanying notes are an integral part of these statements.

74

Asahi Kasei Report 2017

13,328

24,173

118,798

157,388

146,389

1,402,870

49,017

55,419

436,911

(8,293)

(2,441)

(73,919)

40,724

52,978

362,991

116,663

93,412

1,039,870

1,663

1,658

14,823

¥  115,000

¥   91,754

$ 1,025,047

Consolidated Statements of Comprehensive Income Asahi Kasei Corporation and Consolidated Subsidiaries Years Ended March 31, 2017 and 2016 Thousands of U.S. dollars (Note 1)

Millions of yen

Net income

2017 ¥116,663

2016 ¥   93,412

2017 $1,039,870

21,177

(21,098)

188,760

Other comprehensive income: Net increase (decrease) in unrealized gain on other securities Deferred gains or losses on hedges Foreign currency translation adjustment Remeasurements of defined benefit plans Share of other comprehensive income of affiliates accounted for using equity method Total other comprehensive income (Note 6) Comprehensive income

234

1,519

2,086

(8,020)

(48,860)

(71,486)

8,114

(33,331)

72,324

810

(3,567)

7,220

22,315

(105,337)

198,904

¥138,979

¥ (11,925)

$1,238,782

¥137,045

¥ (12,708)

$1,221,544

1,934

783

17,239

Comprehensive income attributable to: Owners of the parent Non-controlling interests The accompanying notes are an integral part of these statements.

Asahi Kasei Report 2017

75

Consolidated Statements of Changes in Net Assets Asahi Kasei Corporation and Consolidated Subsidiaries Years Ended March 31, 2017 and 2016 Millions of yen Shareholders’ equity

Capital stock

Balance at March 31, 2016 Cumulative effect of changes in accounting policies Restated balance Changes during the fiscal year: Dividends from surplus Net income attributable to owners of the parent Purchase of treasury stock Disposal of treasury stock Change of scope of consolidation Change of scope of equity method Capital increase of consolidated subsidiaries Net changes of items other than shareholders’ equity Total changes of items during the period Balance at March 31, 2017

Retained earnings (Note 7 (b))

Capital surplus

¥103,389

¥79,410

¥763,076

103,389

79,410

10 763,086

Accumulated other comprehensive income

Treasury stock

Total Remeasureaccumulated ments of other defined comprehensive benefit plans income

¥48,429

¥(41,353)

¥ 99,177

10 942,734

92,280

(179)

48,429

(41,353)

99,177

(3,150)

(93) 1

33

87,446 ¥850,532

Foreign currency translation adjustment

¥(179)

418 (37)

33 ¥79,443

Deferred gains or losses on hedges

¥ 92,280

115,000

— ¥103,389

Net unrealized gain on other securities

¥(3,150) ¥  942,724

(27,935)

0

Total shareholders’ equity

Noncontrolling interests

Total net assets

¥15,498 ¥1,057,399

15,498

10 1,057,409

(27,935)

(27,935)

115,000 (93) 1 418 (37)

115,000 (93) 1 418 (37)

33

33

(92) 87,388 ¥(3,242) ¥1,030,122

21,195

234

(7,597)

8,213

22,045

21,195 ¥113,475

234 ¥   55

(7,597) ¥40,831

8,213 ¥(33,140)

22,045 ¥121,222

1,273

23,318

1,273 110,705 ¥16,771 ¥1,168,115

Millions of yen Shareholders’ equity

Capital stock

Balance at March 31, 2015 Cumulative effect of changes in accounting policies Restated balance Changes during the fiscal year: Dividends from surplus Net income attributable to owners of the parent Purchase of treasury stock Disposal of treasury stock Change of scope of consolidation Capital increase of consolidated subsidiaries Change of scope of equity method Net changes of items other than shareholders' equity Total changes of items during the period Balance at March 31, 2016

Retained earnings (Note 7 (b))

Capital surplus

Accumulated other comprehensive income

Treasury stock

Total shareholders’ equity

Net unrealized gain on other securities

Deferred gains or losses on hedges

Foreign currency translation adjustment

Total Remeasureaccumulated ments of other defined comprehensive benefit plans income

Noncontrolling interests

Total net assets

¥103,389

¥79,408

¥699,259

¥(3,041)

¥879,014

¥113,562

¥(1,697)

¥ 99,531

¥ (7,757)

¥ 203,639

¥15,068

¥1,097,722

103,389

79,408

699,259

(3,041)

— 879,014

113,562

(1,697)

99,531

(7,757)

203,639

15,068

— 1,097,722

(27,937) 91,754 (113) 4

2

— ¥103,389

2 ¥79,410

63,817 ¥763,076

(109) ¥(3,150)

(27,937)

(27,937)

91,754 (113) 6 —

91,754 (113) 6 —

— —

— —

63,710 ¥942,724

(21,282)

1,519

(51,102)

(33,596)

(104,462)

430

(104,032)

(21,282) ¥ 92,280

1,519 ¥  (179)

(51,102) ¥ 48,429

(33,596) ¥(41,353)

(104,462) ¥   99,177

430 ¥15,498

(40,323) ¥1,057,399

Thousands of U.S. dollars (Note 1) Shareholders’ equity

Balance at March 31, 2016 Cumulative effect of changes in accounting policies Restated balance Changes during the fiscal year: Dividends from surplus Net income attributable to owners of the parent Purchase of treasury stock Disposal of treasury stock Change of scope of consolidation Change of scope of equity method Capital increase of consolidated subsidiaries Net changes of items other than shareholders' equity Total changes of items during the period Balance at March 31, 2017

Asahi Kasei Report 2017

Foreign currency translation adjustment

Total Remeasureaccumulated ments of other defined comprehensive benefit plans income

Capital stock

Capital surplus

$921,553

$707,817

$6,801,640

$(28,077)

$8,402,924

$  822,533

$(1,596)

$431,669

$(368,598)

$  884,009

921,553

707,817

89 6,801,729

(28,077)

89 8,403,013

822,533

(1,596)

431,669

(368,598)

884,009

Treasury stock

(248,997) 1,025,047 (829) 9

0 3,726 (330) 294

— $921,553

294 $708,111

779,446 $7,581,175

(820) $(28,897)

Total shareholders’ equity

Deferred gains or losses on hedges

Retained earnings (Note 7 (b))

The accompanying notes are an integral part of these statements.

76

Accumulated other comprehensive income Net unrealized gain on other securities

Noncontrolling interests

Total net assets

$138,141 $ 9,425,074

138,141

89 9,425,163

(248,997)

(248,997)

1,025,047 (829) 9 3,726 (330)

1,025,047 (829) 9 3,726 (330)

294

294

778,929 $9,181,941

188,921

2,086

(67,715)

73,206

196,497

188,921 $1,011,454

2,086 $   490

(67,715) $363,945

73,206 $(295,392)

196,497 $1,080,506

11,347

207,844

11,347 986,764 $149,487 $10,411,935

Consolidated Statements of Cash Flows Asahi Kasei Corporation and Consolidated Subsidiaries Years Ended March 31, 2017 and 2016 Thousands of U.S. dollars (Note 1)

Millions of yen

Cash flows from operating activities: Income before income taxes Depreciation and amortization Impairment loss Amortization of goodwill Amortization of negative goodwill Increase in provision for periodic repairs Increase (decrease) in provision for product warranties Decrease in provision for removal cost of property, plant and equipment Decrease in net defined benefit liability Interest and dividend income Interest expense Equity in (earnings) losses of affiliates Gain on sales of investment securities Loss on valuation of investment securities Gain on sale of property, plant and equipment Loss on disposal of noncurrent assets (Increase) decrease in notes and accounts receivable—trade (Increase) decrease in inventories Increase (decrease) in notes and accounts payable—trade Increase (decrease) in accrued expenses (Decrease) increase in advances received Other, net Subtotal Interest and dividend income received Interest expense paid Income taxes paid Net cash provided by operating activities Cash flows from investing activities: Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property, plant and equipment Proceeds from sales of property, plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of shares in subsidiaries resulting in change in scope of consolidation Payments for transfer of business Payments of loans receivable Collection of loans receivable Other, net Net cash used in investing activities Cash flows from financing activities: (Decrease) increase in short-term loans payable Increase in commercial paper Proceeds from long-term loans payable Repayment of long-term loans payable Repayments of lease obligations Purchase of treasury stock Proceeds from disposal of treasury stock Cash dividends paid Cash dividends paid to non-controlling interests Other, net Net cash (used in) provided by financing activities Effect of exchange rate change on cash and cash equivalents Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of year Increase in cash and cash equivalents resulting from changes in scope of consolidation Cash and cash equivalents at end of year (Note 8)

2017

2016

2017

¥ 157,388 91,387 1,484 17,806 (159) 703 108 (3,168) (8,150) (6,595) 4,435 (4,899) (9,918) 101 (165) 4,863 (20,756) (9,840) 18,619 2,467 (1,886) (6,721) 227,105 7,733 (4,428) (61,444) 168,965

¥ 146,389 93,811 3,493 15,821 (159) 824 (193) (1,339) (9,227) (6,173) 3,611 854 (8,275) 363 (917) 5,214 48,513 12,901 (24,104) (3,980) 120 (4,863) 272,687 7,558 (3,596) (60,431) 216,218

$ 1,402,870 814,573 13,228 158,713 (1,417) 6,266 963 (28,238) (72,645) (58,784) 39,531 (43,667) (88,404) 900 (1,471) 43,346 (185,008) (87,708) 165,960 21,989 (16,811) (59,907) 2,024,289 68,928 (39,469) (547,678) 1,506,061

(4,105) 5,232 (82,983) 3,178 (8,810) (9,846) 12,018 — — (5,218) 2,169 (1,553) (89,920)

(6,360) 17,364 (85,184) 774 (10,330) (7,017) 10,197 (193,680) (200) (11,131) 2,520 (2,241) (285,287)

(36,590) 46,635 (739,665) 28,327 (78,527) (87,762) 107,122 — — (46,510) 19,333 (13,843) (801,497)

(193,760) 56,000 138,812 (45,513) (965) (93) 1 (27,935) (712) 207 (73,959) (6,759) (1,673) 145,307

213,417 — 9,445 (91,760) (1,411) (113) 6 (27,937) (653) 371 101,365 (5,560) 26,736 112,297

(1,727,070) 499,153 1,237,294 (405,678) (8,601) (829) 9 (248,997) (6,346) 1,845 (659,230) (60,246) (14,912) 1,295,187

443 ¥ 144,077

6,273 ¥ 145,307

3,949 $ 1,284,223

The accompanying notes are an integral part of these statements.

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77

Notes to Consolidated Financial Statements Asahi Kasei Corporation and Consolidated Subsidiaries 1. Major policies for preparing the consolidated financial statements The consolidated financial statements, which are filed with the prime minister of Japan as required by the Financial Instruments and Exchange Act in Japan, are prepared in accordance with accounting principles generally accepted in Japan, which are different in certain respects from the application and disclosure requirements of International Financial Reporting Standards. The accompanying consolidated financial statements are a translation of those filed with the prime minister of Japan and incorporate certain modifications to enhance foreign readers’ understanding of the consolidated financial statements. In addition, the notes to the consolidated financial statements include certain financial information which is not required under the disclosure regulations in Japan, but is presented herein as additional information. The U.S. dollar amounts presented in the consolidated financial statements are included solely for the convenience of readers. These translations should not be construed as representations that the Japanese yen amounts actually represent, have been, or could be converted into U.S. dollars. As the amounts shown in U.S. dollars are for convenience only, and are not intended to be computed in accordance with generally accepted translation procedures, the approximate current exchange rate of ¥112.19=US$1 prevailing on March 31, 2017, has been used.

Consolidation and investments in affiliated companies The consolidated financial statements consist of the accounts of the parent company and 171 subsidiaries (174 subsidiaries at March 31, 2016, hereinafter collectively referred to as the “Company”) which, with minor exceptions due to immateriality, are all majority or wholly owned

companies, including 6 core operating companies (Asahi Kasei Homes Corp., Asahi Kasei Construction Materials Corp., Asahi Kasei Microdevices Corp., Asahi Kasei Pharma Corp., Asahi Kasei Medical Co., Ltd., and ZOLL Medical Corporation), Polypore International, LP, and Tongsuh Petrochemical Corp. Ltd. (Korea). Material inter-company transactions and accounts have been eliminated. Investments in unconsolidated subsidiaries and 20% to 50% owned companies in which the Company exercises significant influence are accounted for, with minor exceptions due to immateriality, using the equity method of accounting. There were 32 such unconsolidated subsidiaries and 20% to 50% owned companies to which the equity method is applied at March 31, 2017 (31 at March 31, 2016), including Asahi Kasei EIC Solutions Corp. and Asahi Yukizai Corporation. Certain subsidiaries’ results are reported in the consolidated financial statements using a fiscal year ending December 31. Material differences in inter-company transactions and accounts arising from the use of different fiscal year-ends are appropriately adjusted for through consolidation procedures. All assets and liabilities of acquired companies are measured at their fair value and any difference between the net assets and the cost of investment is recognized as goodwill or negative goodwill. Goodwill, and negative goodwill incurred through business combinations which took place before April 1, 2010, are amortized using the straight-line method over a reasonable period during which their effects would last, with the exception of minor amounts which are charged to income as incurred.

2. Significant accounting policies (a) Cash and cash equivalents

ii) Provision for periodic repairs

For cash flow statement purposes, cash and cash equivalents include all highly liquid investments, generally with original maturities of three months or less, which are readily convertible to known amounts of cash, and therefore present an insignificant risk of changes in value due to changes in interest rates.

The portion of foreseeable periodic repair expenses deemed to correspond to normal wear and tear of plant and equipment as of the closing date of the fiscal year is recognized as provision for periodic repairs.

(b) Inventories Inventories held for sale in the ordinary course of business are stated at the lower of cost or net realizable value. Residential lots and dwellings for sale are stated at specifically identified costs.

(c) Noncurrent assets and depreciation/amortization Property, plant and equipment (except for lease assets) are stated at cost. Significant renewals and improvements are capitalized at cost, while maintenance and repairs are charged to income as incurred. Depreciation is provided for under the declining-balance method for property, plant and equipment, except for buildings and building accessories acquired on or after April 1, 2016 which are depreciated using the straight-line method, at rates based on estimated useful lives of the assets, principally ranging from 5 to 60 years for buildings and from 4 to 22 years for machinery and equipment and vehicles. Intangible fixed assets (except for lease assets), including software for internal use, are mainly amortized using the straight-line method over the estimated useful lives of the assets. The estimated useful life of software for internal use is mainly 5 years. Lease assets (financing lease transactions without title transfer) are depreciated/amortized on a straight-line basis over the period of the lease with no residual value. For financing lease transactions without title transfer whose transaction date is before March 31, 2008, the previous method of accounting for lease transactions continues to be applied, with periodic lease charges for financing leases being charged to income as incurred.

(d) Significant allowances i) Allowance for doubtful accounts Estimates of the unrecoverable portion of receivables, generally based on historical rates and for specific receivables of particular concern based on individual estimates of recoverability, are recognized as allowance for doubtful accounts.

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Asahi Kasei Report 2017

iii) Provision for product warranties Estimates of product warranty expenses based on historical rates are recognized as provision for product warranties.

iv) Provision for removal cost of property, plant and equipment Provision for removal cost of property, plant and equipment is recorded based on estimated future removal cost of property, plant and equipment at the end of each fiscal year.

v) Provision for loss on litigation Provision for loss on litigation is recorded for estimated losses related to pending litigation.

(e) Accounting for retirement benefits i) Method of attributing expected retirement benefits to each period In calculating retirement benefit obligations, the Company applies a method of attributing expected retirement benefits to each period based on a benefit formula basis.

ii) Accounting for actuarial gains/losses and prior service costs Actuarial gains/losses are amortized using the straight-line method from the fiscal year following their accrual over a certain period (mainly 10 years) within the average remaining service period of employees at the time of accrual. Prior service costs are amortized using the straight-line method over a certain period (mainly 10 years) within the average remaining service period of employees at the time of accrual.

iii) Adoption of the simplified method In calculating expected defined benefit liability and periodic retirement benefit expenses, certain consolidated subsidiaries have adopted the simplified method. Under this method, the expected defined benefit liability is recorded at the severance payment amount to be required should all employees retire voluntarily at fiscal year end.

(f) Significant revenue and expense recognition i) Construction activities that are realizable as of fiscal year end The percentage-of-completion method (progress of work is estimated using the percentage of costs incurred to the total projected costs) is applied.

ii) Other construction activities The completed-contract method is used.

(g) Financial instruments i) Securities Securities are classified into four categories: trading securities, held-tomaturity debt securities, equity securities of unconsolidated subsidiaries and affiliates, and other securities. At March 31, 2017 and 2016, the Company did not have trading securities or held-to-maturity debt securities. Equity securities of unconsolidated subsidiaries and affiliates are accounted for, with minor exceptions due to immateriality, using the equity method of accounting. Other securities whose fair values are readily determinable are carried at fair value with net unrealized gains or losses, net of income taxes, being included as a component of net assets. Other securities whose fair values are not readily determinable are stated at cost. In cases where any significant decline in the realizable value is assessed to be other than temporary, the cost of other securities is devalued by the impaired amount and is charged to income. Realized gains and losses are determined using the average cost method and are reflected in the consolidated income statements.

ii) Derivative financial instruments All derivatives are stated at fair value. Gains or losses arising from changes in fair value are recognized in the period in which they arise, except for

derivatives that are designated as hedging instruments. Gains or losses arising from changes in fair value of these qualifying hedges are deferred as “Deferred gains or losses on hedges” until being offset against gains or losses of the underlying hedged assets and liabilities.

(h) Taxes Accrued income taxes are stated at the estimated amount of payables for corporation, enterprise, and inhabitant taxes. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. The Company has elected to file its return under the consolidated tax filing system in Japan. Transactions subject to consumption taxes are recorded at amounts net of consumption taxes.

(i) Translation of foreign currencies Foreign currency receivables and payables are translated into Japanese yen at the exchange rates prevailing at the balance sheet date. Resulting gains and losses are charged to income for the period. Assets and liabilities of foreign subsidiaries are translated into Japanese yen at fiscal year-end exchange rates, and income and expenses of same are translated into Japanese yen at the average exchange rate for the fiscal year. Shareholders’ equity of foreign subsidiaries is translated into Japanese yen at the historical exchange rates. The translation differences in Japanese yen amounts arising from the use of different rates are recognized as foreign currency translation adjustments in the consolidated balance sheets. A portion of the foreign currency translation adjustment is allocated to non-controlling interests and the Company’s portion is presented as a separate component of net assets in the consolidated balance sheets.

3. Changes in significant accounting policies (a) Changes in accounting policies i) A  pplication of revised implementation guidance on recoverability of deferred tax assets The Accounting Standards Board of Japan (ASBJ) issued revised Guidance No. 26 “Implementation Guidance on Recoverability of Deferred Tax Assets.” This revised guidance is applied from the fiscal year ended March 31, 2017. Accordingly, the method of accounting related to recoverability of deferred tax assets has been partially amended. In accordance with the transitional accounting provisions set forth in Article 49, Paragraph 4, of the revised Guidance No. 26, the difference between the amount of deferred tax assets at the beginning of the fiscal year ended March 31, 2017, as calculated in accordance with the applicable provisions of Article 49, Paragraph 3, Items 1 through 3, of the revised Guidance No. 26, and the amount of deferred tax assets at the end of the fiscal year ended March 31, 2016, is added to retained earnings at the beginning of the fiscal year ended March 31, 2017. The effect of this change on deferred tax assets (investments and other assets) and retained earnings at the beginning of the fiscal year ended March 31, 2017, is immaterial.

(b) Changes in presentation Consolidated statements of income In the fiscal year ended March 31, 2017, donations, which had previously been included in others under non-operating expenses, exceeded 10% of total non-operating expenses, and is reported separately. The consolidated statements of income for the fiscal year ended March 31, 2016, have been adjusted accordingly, resulting in others under non-operating expenses being ¥851 million lower than previously reported, reflecting the separation of the same amount as donations.

ii) Application of practical solution on a change in depreciation method due to Tax Reform 2016 The ASBJ issued Practical Issues Task Force (PITF) No. 32 “Practical Solution on a change in depreciation method due to Tax Reform 2016.” This practical solution is applied from the fiscal year ended March 31, 2017. Accordingly, the method of depreciation of buildings and accompanying facilities and of structures has changed from the declining-balance method to the straight-line method. The effect of this change on operating income, ordinary income, and income before income taxes during the fiscal year ended March 31, 2017, is immaterial.

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4. Notes to Consolidated Balance Sheets (a) Investment securities Among investment securities, shares of unconsolidated subsidiaries and affiliates as of March 31, 2017 and 2016, amounted to ¥65,725 million (US$585,837 thousand) and ¥55,786 million, respectively. Included in those amounts are investments in joint ventures of ¥33,686 million (US$300,258 thousand) and ¥27,003 million, respectively.

(b) Pledged assets and secured debt A summary of assets pledged as collateral and secured debt as of March 31, 2017 and 2016, is shown below: Millions of yen

Pledged assets: Buildings and structures Machinery, equipment and vehicles Total pledged assets Secured debt: Short-term loans payable Long-term loans payable Total secured debt

Thousands of U.S. dollars

2017

2016

2017

¥106 1 ¥107

¥118 1 ¥120

$945 9 $954

¥  0 28 ¥ 29

¥  1 77 ¥ 78

$  0 250 $258

Besides the above, investment securities pledged to suppliers as transaction guarantees at March 31, 2017 and 2016, were ¥61 million (US$544 thousand) and ¥54 million, respectively.

(c) Contingent liabilities In October 2015 Asahi Kasei Corp. disclosed that Asahi Kasei Construction Materials Corp., a consolidated subsidiary of Asahi Kasei Corp., which performed pile installation work as a secondary subcontractor for the construction of a condominium complex in Yokohama, Kanagawa, Japan, submitted incorrect data in the pile installation report for the precast concrete piles installed for this project. There was manipulation of ammeter data and flowmeter data for the installation of piles. Asahi Kasei Corp. established a task force and an internal fact-finding committee as well as an independent commission to advance an investigation, and on October 22, 2015, Asahi Kasei Construction Materials Corp. reported its record of similar pile installation work over the past 10 years to Japan’s Ministry of Land, Infrastructure, Transport and Tourism (MLIT). On November 24, 2015, Asahi Kasei Construction Materials Corp. completed all possible investigation of whether or not there was manipulation of data regarding the installation of precast concrete piles, and reported the results to the MLIT. Out of the 3,052 projects subject to investigation, manipulation of data was found for 360 projects. Regarding projects where manipulation of data was found, Asahi Kasei Construction Materials is cooperating with the prime contractors and the owners of the buildings in efforts to confirm safety based on instructions from the MLIT. Regarding projects where a Specific Administrative Agency has confirmed safety, the Specific Administrative Agency has issued a report to the MLIT. (At a meeting of the House of Councillors Committee on Land and Transport held on April 5, 2016, it was reported that the safety of 357 of the 360 projects had been confirmed.) Although there is a possibility that an effect on the consolidated results of Asahi Kasei Corp. may emerge such as the recording of an additional reserve, etc., no such effect is reflected in the consolidated financial statements due to the difficulty of making a rational estimate of the amount of financial impact from this matter as of the time of preparation of the consolidated financial statements. Contingent liabilities at March 31, 2017 and 2016, arising in the ordinary course of business were as follows: Millions of yen

Loans guaranteed Letters of awareness Completion guarantees Total

2017 ¥35,774 — 10,185 ¥45,959

Thousands of U.S. dollars

2016 ¥36,808 — 11,989 ¥48,797

2017 $318,870 — 90,783 $409,653

The parent company and certain of its subsidiaries and affiliates are defendants in several pending lawsuits. However, based upon the information currently available to both the Company and its legal counsel, management of the Company believes that any damages from such lawsuits will not have a material impact to the Company’s consolidated financial statements.

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Asahi Kasei Report 2017

(d) Deferred gain on property, plant and equipment deducted for tax purposes The accumulated reduced-value entries, which are directly deducted from property, plant and equipment, as of March 31, 2017 and 2016, were ¥9,572 million (US$85,320 thousand) and ¥9,684 million, respectively. The breakdown of reduced-value entries as of March 31, 2017 and 2016, was as follows: Millions of yen

Buildings and structures Machinery, equipment and vehicles Land Other Total

2017 ¥3,394 5,865 167 146 ¥9,572

Thousands of U.S. dollars

2016 ¥3,407 5,937 167 173 ¥9,684

2017 $30,252 52,277 1,489 1,301 $85,320

5. Notes to Consolidated Statements of Income (a) Selling, general and administrative expenses Major components of selling, general and administrative expenses for the years ended March 31, 2017 and 2016, were as follows: Millions of yen

Salaries and benefits Research and development* Freight and storage

2017 ¥165,337 59,476 37,450

Thousands of U.S. dollars

2016 ¥160,091 60,990 36,794

2017 $1,473,723 530,136 333,809

* The aggregate amounts of research and development expenses included in manufacturing costs and selling, general and administrative expenses for the years ended March 31, 2017 and 2016, were ¥79,566 million (US$709,208 thousand) and ¥81,118 million, respectively.

(b) Gain or loss on valuation of inventories Inventories held for sale in the ordinary course of business are stated at the lower of cost or net realizable value. (Gain) loss on valuation of inventories for the years ended March 31, 2017 and 2016, were as follows: Millions of yen

2017 ¥(152)

Thousands of U.S. dollars

2016 ¥1,427

2017 $(1,355)

(c) Gain on sales of noncurrent assets Major components of gain on sales of noncurrent assets for the years ended March 31, 2017 and 2016, were as follows: Millions of yen

Land Machinery Other

2017 ¥146 14 4

Thousands of U.S. dollars

2016 ¥777 93 47

2017 $1,301 125 36

(d) Loss on disposal of noncurrent assets Loss on disposal of noncurrent assets for the years ended March 31, 2017 and 2016, was primarily loss on abandonment and sale of buildings, machinery and equipment, etc. The abandonment and sale of buildings, machinery and equipment, etc. was performed under a single, all-inclusive contract for each facility.

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(e) Impairment loss Major components of impairment losses for the years ended March 31, 2017 and 2016, were as follows: Thousands of U.S. dollars

Millions of yen

Use

Joint sales rights of pharmaceutical products Underground uranium storage facility Idle assets Production facility for semiconductors Production facility for performance paper Production facility for electronic devices Office assets Production facility for synthetic resin Dormitory for employees Others

Asset class

Location

2017

2016

2017

Sales rights Buildings, etc. Buildings, etc. Machinery and equipment, etc. Machinery and equipment, etc. Machinery and equipment, etc. Buildings, etc.

Chiyoda-ku, Tokyo Hyuga, Miyazaki Fuji, Shizuoka, etc.

¥   — — —

¥3,942 1,850 817

$    — — —

Nobeoka, Miyazaki



550



Gobo, Wakayama



142



Machinery and equipment, etc. Buildings, etc. Machinery and equipment, etc.

Hyuga, Miyazaki Chiyoda-ku, Tokyo, etc.

1,210



10,785

1,208



10,767

Sodegaura, Chiba Izunokuni, Shizuoka

1,131 125

— —

10,081 1,114

265

600

2,362

Fuji, Shizuoka, etc.

Item on the Consolidated Statements of Income

Loss on discontinuation of joint sales agreement Impairment losses Impairment losses Impairment losses Business structure improvement expenses Business structure improvement expenses Impairment losses Business structure improvement expenses Impairment losses Impairment losses and business structure improvement expenses

Grouping of operating assets is based on managerial accounting categories, with consideration given to production process, geographic location, and domain of authority for making investment decisions. Idle assets are recorded separately in each fixed assets class. With respect to production facility for electronic devices, production facility for synthetic resin, and part of others, the book value was reduced to the recoverable amount due to diminished profitability, and with respect to dormitory for employees and part of others, the book value was reduced to the recoverable amount due to disappearance of prospects for future use. The recoverable amount is stated as value for future usage, which is calculated based on discounted future cash flows within the applicable discount rate of 6% as of March 31, 2017 and 2016. With respect to office assets, the entire book value is eliminated due to disappearance of prospects for future use. Among the extraordinary losses under others, ¥115 million (US$1,025 thousand) and ¥324 million were recorded under business structure improvement expenses for the years ended March 2017 and 2016, respectively.

(f) Business structure improvement expenses Major components of business structure improvement expenses for the years ended March 31, 2017 and 2016, were as follows: Millions of yen

Impairment of fixed assets Additional payment of retirement benefits due to application of early retirement, etc. Loss on disposal and devaluation of inventory and others Total

2017 ¥2,456 — 3,734 ¥6,189

Thousands of U.S. dollars

2016 ¥  466 110 3,029 ¥3,606

2017 $21,891 — 33,283 $55,165

(g) Loss on piling business Asahi Kasei Construction Materials Corp., a consolidated subsidiary of Asahi Kasei Corp., submitted incorrect data within their pile installation report for the precast concrete piles installed as a secondary subcontractor for the construction of a condominium complex in Yokohama, Kanagawa, Japan. There was manipulation of ammeter data obtained when boring holes for installation, and manipulation of flowmeter data for the injection of cement milk for consolidation of pile tips. As a result of this matter, Asahi Kasei Corp. has recorded an extraordinary loss in the year ended March 31, 2016, as “loss on piling business” for expenses related to the investigation, etc., of the manipulation of such data.

(h) Loss on discontinuation of joint sales agreement Millions of yen

Impairment losses Cancellation fee Other Total

82

Asahi Kasei Report 2017

2017 ¥— — — ¥—

Thousands of U.S. dollars

2016 ¥3,942 1,303 22 ¥5,266

2017 $— — — $—

6. Notes to Consolidated Statements of Comprehensive Income Recycling adjustment and tax effects on other comprehensive income for the years ended March 31, 2017 and 2016, were as follows: Millions of yen

Net unrealized gain on other securities: Changes during the fiscal year Recycling adjustment Pre-tax effect Tax effect Net unrealized gain on other securities Deferred gains or losses on hedges: Changes during the fiscal year Recycling adjustment Adjustment on the acquisition cost of assets Pre-tax effect Tax effect Deferred gains or losses on hedges Foreign currency translation adjustment: Changes during the fiscal year Recycling adjustment Pre-tax effect Tax effect Foreign currency translation adjustment Remeasurements of defined benefit plans: Changes during the fiscal year Recycling adjustment Pre-tax effect Tax effect Remeasurements of defined benefit plans Share of other comprehensive income of affiliates accounted for using equity method: Changes during the fiscal year Recycling adjustment Share of other comprehensive income of affiliates accounted for using equity method Total other comprehensive income

Thousands of U.S. dollars

2017

2016

2017

¥ 40,337 (9,858) 30,479 (9,302) 21,177

¥ (26,559) (7,879) (34,438) 13,341 (21,098)

$ 359,542 (87,869) 271,673 (82,913) 188,760

380 (170) — 210 24 234

(5,649) 1,976 5,718 2.045 (527) 1,519

3,387 (1,515) — 1,872 214 2,086

(8,073) — (8,073) 53 (8,020)

(49,549) 1,028 (48,522) (338) (48,860)

(71,958) — (71,958) 472 (71,486)

(74) 10,901 10,827 (2,713) 8,114

(50,607) 3,397 (47,210) 13,880 (33,331)

(660) 97,166 96,506 (24,182) 72,324

866 (55) 810 ¥ 22,315

(3,363) (204) (3,567) ¥(105,337)

7,719 (490) 7,220 $ 198,904

7. Notes to Consolidated Statements of Changes in Net Assets For the year ended March 31, 2017 (a) Class and total number of issued and outstanding shares and treasury stock Thousands of shares

Issued and outstanding shares Common stock Total Treasury stock Common stock (Notes 1 & 2) Total

Number of shares as of March 31, 2016

Increase in number of shares during the fiscal year

Decrease in number of shares during the fiscal year

Number of shares as of March 31, 2017

1,402,616 1,402,616

— —

— —

1,402,616 1,402,616

5,862 5,862

99 99

2 2

5,959 5,959

Notes: 1. The increase of 99 thousand shares in common stock of treasury stock was due to the purchase of shares in quantities of less than one share unit. 2. The decrease of 2 thousand shares in common stock of treasury stock was due to the sale of shares in quantities of less than one share unit.

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83

(b) Dividends i) Cash dividends paid 1) The following was resolved by the Board of Directors on May 11, 2016. Dividends for common stock Total dividends Dividend per share Date of record Payment date

¥13,968 million (US$124,503 thousand) ¥10.00 (US$0.09) March 31, 2016 June 6, 2016

2) The following was resolved by the Board of Directors on November 1, 2016. Dividends for common stock Total dividends Dividend per share Date of record Payment date

¥13,967 million (US$124,494 thousand) ¥10.00 (US$0.09) September 30, 2016 December 1, 2016

ii) Dividends for which the date of record falls within the fiscal year under review but the payment date occurs in the following fiscal year The following was resolved by the Board of Directors on May 11, 2017. Dividends for common stock Total dividends Source of dividends Dividend per share Date of record Payment date

¥19,553 million (US$174,285 thousand) Retained earnings ¥14.00 (US$0.12) March 31, 2017 June 6, 2017

For the year ended March 31, 2016 (a) Class and total number of issued and outstanding shares and treasury stock Thousands of shares

Issued and outstanding shares Common stock Total Treasury stock Common stock (Notes 1 & 2) Total

Number of shares as of March 31, 2015

Increase in number of shares during the fiscal year

Decrease in number of shares during the fiscal year

Number of shares as of March 31, 2016

1,402,616 1,402,616

— —

— —

1,402,616 1,402,616

5,743 5,743

125 125

7 7

5,862 5,862

Notes: 1. The increase of 125 thousand shares in common stock of treasury stock was due to the purchase of shares in quantities of less than one share unit. 2. The decrease of 7 thousand shares in common stock of treasury stock was due to the sale of shares in quantities of less than one share unit.

(b) Dividends i) Cash dividends paid 1) The following was resolved by the Board of Directors on May 12, 2015. Dividends for common stock Total dividends Dividend per share Date of record Payment date

¥13,969 million ¥10.00 March 31, 2015 June 4, 2015

2) The following was resolved by the Board of Directors on November 6, 2015. Dividends for common stock Total dividends Dividend per share Date of record Payment date

¥13,968 million ¥10.00 September 30, 2015 December 1, 2015

ii) Dividends for which the date of record falls within the fiscal year under review but the payment date occurs in the following fiscal year The following was resolved by the Board of Directors on May 11, 2016. Dividends for common stock Total dividends Source of dividends Dividend per share Date of record Payment date

84

Asahi Kasei Report 2017

¥13,968 million Retained earnings ¥10.00 March 31, 2016 June 6, 2016

8. Notes to Consolidated Statements of Cash Flows (a) Cash and cash equivalents Reconciliation of cash and cash equivalents on the consolidated statements of cash flows to the amounts disclosed on the consolidated balance sheets at March 31, 2017 and 2016, was as follows: Millions of yen

Cash and deposits Time deposits with deposit term of over 3 months Money market funds included in short-term investment securities Cash and cash equivalents

2017 ¥145,289 (1,212) — ¥144,077

Thousands of U.S. dollars

2016 ¥146,054 (2,281) 1,534 ¥145,307

2017 $1,295,026 (10,803) — $1,284,223

9. Leases (a) Financing lease transactions Financing lease transactions without title transfer

i) Components of lease assets are as follows: 1) Property, plant and equipment: Mainly model homes (buildings and structures) for housing business. 2) Intangible fixed assets: Software

ii) Depreciation of lease assets: As stated in Note 2 “Significant accounting policies (c) Noncurrent assets and depreciation/amortization,” the financing lease transactions without title transfer which occurred prior to March 31, 2008, are accounted for on a basis similar to an operating lease. For such leases, information for the cost and related accumulated amortization, computed using the straight-line method over the term of the lease assuming such lease transactions accounted for as an operating lease had been accounted for as a financing lease, is required to be disclosed. However, such disclosure is omitted due to immateriality.

(b) Operating lease transactions Future lease payments for the non-cancelable portion of the Company’s operating leases at March 31, 2017 and 2016, were as follows: Millions of yen

Due within one year Due after one year Total

2017 ¥ 5,753 33,899 ¥39,652

Thousands of U.S. dollars

2016 ¥ 5,414 5,255 ¥10,668

2017 $ 51,279 302,157 $353,436

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10. Financial instruments (a) Overview of financial instruments i) Policy related to financial instruments The Company raises long-term funds as required mainly for its planned capital expenditures by borrowing from banks, borrowing from life insurance companies, issuing bonds, etc. A portion of the surplus funds is invested only in highly stable financial assets. Short-term working funds are raised by bank borrowings, issuance of commercial paper, etc. Derivative transactions are mainly entered into for the purpose of reducing risks related to assets and liabilities which are exposed to risks of fluctuations of exchange rate and interest rate. Derivatives are not traded for speculative purposes.

ii) Components of financial instruments, their risks and risk management structure As operating receivables, notes and accounts receivable—trade are exposed to credit risk of customers. As the business of the Company spans a wide range of fields, operating receivables are not excessively concentrated on specific customers, but the parent company and each consolidated subsidiary monitor and manage the credit condition of each customer. Investment securities are exposed to the risk of fluctuations in market price, but they are mainly equity securities of companies with which the Company has business relationships. These securities are held for the purpose of maintaining the business relationships. Fair value is periodically evaluated, and the financial condition of the issuing company is monitored. As operating liabilities, notes and accounts payable—trade generally have a payment term of 1 year or less. Variable interest-rate borrowings are exposed to the risk of interest-rate fluctuations, but derivatives (interest-rate and currency swaps, interest-rate swaps) are used as hedges to fix interest expenses for a portion of long-term variable interest-rate borrowings. Operating receivables and operating liabilities include those denominated in currencies other than Japanese yen, and are thus exposed to the risk of exchange-rate fluctuations. In order to minimize the effects of short-term exchange-rate fluctuations, the Company hedges with derivative transactions (forward exchange contracts), in principle, within the range of the underlying receivables and liabilities amount. Derivative transactions are exposed to the credit risk of transacting financial institutions, but the credit condition of those financial institutions is reviewed through periodical monitoring. Such transactions are performed and managed in accordance with the Company’s internal regulations which stipulate the related authority, procedures, limits, etc. Borrowings are exposed to liquidity risk, but the parent company specifies standards for required on-hand funds based on the Company’s funding plans, prepares and revises plans for cash receipts and disbursements as appropriate, and enters into commitment-line agreements with transacting financial institutions to manage such risk. Loan securitization in the housing business is exposed to the risk of interest-rate fluctuations between the time of origination of housing loans and the time of execution of their securitization, but derivative transactions (interest-rate swaps) are entered into in order to reduce such risk.

iii) Supplementary explanation of fair value of financial instruments The fair value of financial instruments is based on their quoted market price, if available. In the case where no quoted market price is available, a reasonably estimated fair value is used. As variable factors are incorporated in its estimation, fair value may change due to the adoption of different assumptions, conditions, etc. The stated amount of contracts regarding derivative transactions included in Note 12 “Derivative financial instruments” is not itself an indication of the market risk of the derivative transactions.

(b) Fair value of financial instruments Amounts carried on the consolidated balance sheets, their fair values, and the differences between them as of March 31, 2017 and 2016, were as shown below. Financial instruments whose fair values are deemed extremely difficult to determine are not included in this table (See Notes 2), 3) and 4) below). Millions of yen

2017 Cash and deposits Notes and accounts receivable—trade Allowance for doubtful accounts (*1) Short-term investment securities and investment securities: Investments in affiliates Other securities Long-term loans receivable Total assets Notes and accounts payable—trade Short-term loans payable Commercial paper Income taxes payable Bonds payable Long-term loans payable Lease obligations Long-term guarantee deposits Total liabilities Derivative financial instruments (*2)

86

Asahi Kasei Report 2017

Carrying amount

Fair value

Difference

¥145,289 302,751 (2,078) 300,672

¥145,289

¥    —

300,672



14,529 211,694 19,371 691,554 147,543 88,965 56,000 16,202 40,000 217,094 773 8,299 574,876 ¥    (249)

9,558 211,694 19,366 686,579 147,543 88,965 56,000 16,202 40,646 216,145 765 8,344 574,610 ¥    (249)

(4,971) — (5) (4,976) — — — — (646) 949 8 (45) 266 ¥    —

Millions of yen

2016 Cash and deposits Notes and accounts receivable—trade Allowance for doubtful accounts (*1) Short-term investment securities and investment securities: Investments in affiliates Other securities Long-term loans receivable Total assets Notes and accounts payable—trade Short-term loans payable Income taxes payable Bonds payable Long-term loans payable Lease obligations Long-term guarantee deposits Total liabilities Derivative financial instruments (*2)

Carrying amount

Fair value

Difference

¥146,054 280,095 (1,699) 278,396

¥146,054

¥    —

278,396



10,890 183,672 16,607 635,618 126,653 273,418 32,735 40,000 134,801 1,456 8,032 617,096 ¥    354

5,985 183,672 16,604 630,711 126,653 273,418 32,735 40,650 137,008 1,465 8,088 620,017 ¥    354

(4,905) — (3) (4,908) — — — (650) (2,207) (9) (55) (2,921) ¥    —

Thousands of U.S. dollars

2017 Cash and deposits Notes and accounts receivable—trade Allowance for doubtful accounts (*1) Short-term investment securities and investment securities: Investment in affiliates Other securities Long-term loans receivable Total assets Notes and accounts payable—trade Short-term loans payable Commercial paper Income taxes payable Bonds payable Long-term loans payable Lease obligations Long-term guarantee deposits Total liabilities Derivative financial instruments (*2) (*1) This reduction represents specific allowance for doubtful accounts related to notes and accounts receivable—trade. (*2) The amounts represent net amount of assets and liabilities resulting from derivative transactions. In the case of a net liability, the amount is shown in parentheses.  ethod to determine the estimated fair value of financial instruments; securities and Note 1) M derivative financial instruments i) Assets 1) Cash and deposits, notes and accounts receivable—trade As their fair value approximates book value due to their short maturity, the corresponding book value amount is used as fair value. 2) Short-term investment securities and investment securities The stock exchange prices are used to determine fair value of traded stocks, and the corresponding book value amount is used as fair value of money market funds, because their fair value approximates book value. Refer to Note 11 “Marketable securities and investment securities” for information on securities classified by holding purpose. 3) Long-term loans receivable The carrying amounts shown include long-term loans receivable scheduled for repayment within one year. Their fair values are determined based on the present value of principal and interest, discounted using current assumed rates for similar long-term loans receivable. For long-term loans receivable bearing variable interest rates, as they are deemed to reflect market interest rates within a short term, book values are used as fair value.

Carrying amount

Fair value

Difference

$1,295,026 2,698,556 (18,522) 2,680,025

$1,295,026

$     —

2,680,025



129,504 1,886,924 172,662 6,164,132 1,315,117 792,985 499,153 144.416 356,538 1,935,057 6,890 73,973 5,124,129 $    (2,219)

85,195 1,886,924 172,618 6,119,788 1,315,117 792,985 499,153 144,416 362,296 1,926,598 6,819 74,374 5,121,758 $    (2,219)

(44,309) — (44) (44,353) — — — — (5,758) 8,459 71 (401) 2,371 $     —

ii) Liabilities 1) N  otes and accounts payable–trade; short-term loans payable; commercial paper; income taxes payable As their fair values approximate book value due to their short maturity, the corresponding book value amounts are used as fair value. 2) Bonds payable Fair value of the bonds payable issued by the parent company is based on the quoted market price if available. For those without a quoted market price that are subject to special treatment for interest-rate swaps, fair value is based on the present value by totaling the amount of principal and interest, together with related interest-rate swaps, discounted by the interest rate that would apply if equivalent bonds were newly issued. 3) Long-term loans payable The carrying amounts shown include long-term loans payable that are scheduled for repayment within one year of March 31, 2017 and 2016, amounting to ¥24,510 million (US$218,469 thousand) and ¥40,169 million, respectively. Their fair values are based on present value of principal and interest discounted using the current assumed rates for similar long-term loans payable. For long-term loans payable bearing variable interest rates, fair value of those subject to special treatment of interest rate-swaps is based on present value by totaling the amount of principal and interest, together with related interest-rate swaps, discounted by the interest rate that would apply if equivalent long-term loans were newly entered. For other long-term loans payable, book value is used as fair value as they are deemed to reflect market interest rates within a short term.

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4) Lease obligations The carrying amounts shown are the total amount of lease obligations under current liabilities and lease obligations under noncurrent liabilities. Present value, calculated by discounting the total amount of principal and interest using the presumed interest rate that would apply if lease transactions were newly made, is used as the fair value. 5) Long-term guarantee deposits In cases where the deposit period can be estimated, the fair value of long-term guarantee deposits is determined using a discounted cash flow over that period. iii) Derivative transactions Refer to Note 12 “Derivative financial instruments.” Note 2) For equity investments in nonpublic companies, with a carrying amount as of March 31, 2017 and 2016, amounting to ¥54,787 million (US$488,341 thousand) and ¥48,453 million, respectively, fair value is not included in short-term investment securities and investment

securities, as no quoted market price is available and it is deemed extremely difficult to determine fair value due to the impossibility of estimating future cash flows. Note 3) F or investment securities, with a carrying amount as of March 31, 2017 and 2016, amounting to ¥3,127 million (US$27,872 thousand) and ¥3,117 million, respectively, fair value is not included in short-term investment securities and investment securities, as no quoted market price is available and it is deemed extremely difficult to determine fair value due to the impossibility of estimating future cash flows. Note 4) F or long-term guarantee deposits, the fair value of a portion having a carrying amount as of March 31, 2017 and 2016, amounting to ¥12,180 million (US$108,566 thousand) and ¥12,098 million, respectively, is not included as no quoted market price is available and it is deemed extremely difficult to determine fair value due to the impossibility of estimating future cash flows.

Note 5) For monetary credits and securities with maturity, the amounts scheduled for redemption subsequent to the closing date are as follows: Millions of yen

2017

Cash and deposits Notes and accounts receivable—trade Long-term loans receivable Total

Due within one year

Due after one year, within five years

¥145,289 302,751 453 ¥448,493

¥    — — 18,912 ¥18,912

Due after five years, Due after more than within ten years ten years

¥— — 5 ¥ 5

¥— — — ¥—

Millions of yen

2016

Cash and deposits Notes and accounts receivable—trade Long-term loans receivable Total

Due within one year

Due after one year, within five years

¥146,054 280,095 254 ¥426,402

¥    — — 16,353 ¥16,353

Due after five years, Due after more than within ten years ten years

¥— — — ¥—

¥— — — ¥—

Thousands of U.S. dollars

2017

Cash and deposits Notes and accounts receivable—trade Long-term loans receivable Total

Due within one year

Due after one year, within five years

$1,295,026 2,698,556 4,038 $3,997,620

$     — — 168,571 $168,571

Due after five years, Due after more than within ten years ten years

$— — 45 $45

$— — — $—

Note 6) For bonds payable, long-term loans payable, lease obligations, and other interest-bearing debt, the amounts scheduled for repayment subsequent to the closing date are as follows: Millions of yen

2017 Year ending March 31

Short-term loans payable

Commercial paper

Bonds payable

Long-term loans payable

Lease obligations

Total

2018 2019 2020 2021 2022 2023 and thereafter

¥88,965 — — — — —

¥56,000 — — — — —

¥20,000 — 20,000 — — —

¥24,510 59,796 21,279 22,900 32,790 55,819

¥305 186 143 112 26 —

¥189,780 59,982 41,422 23,012 32,816 55,819

Millions of yen

2016

88

Year ending March 31

Short-term loans payable

Commercial paper

Bonds payable

Long-term loans payable

Lease obligations

Total

2017 2018 2019 2020 2021 2022 and thereafter

¥273,418 — — — — —

¥— — — — — —

¥    — 20,000 — 20,000 — —

¥40,169 18,941 49,616 12,028 4,436 9,611

¥919 280 118 83 55 1

¥314,506 39,221 49,734 32,111 4,491 9,612

Asahi Kasei Report 2017

Thousands of U.S. dollars

2017 Year ending March 31

Short-term loans payable

Commercial paper

Bonds payable

Long-term loans payable

Lease obligations

Total

2018 2019 2020 2021 2022 2023 and thereafter

$792,985 — — — — —

$499,153 — — — — —

$178,269 — 178,269 — — —

$218,469 532,989 189,669 204,118 292,272 497,540

$2,719 1,658 1,275 998 232 —

$1,691,595 534,647 369,213 205,116 292,504 497,540

11. Marketable securities and investment securities (a) Other securities with available fair value The aggregate cost, carrying amount which was identical to fair value, and gross unrealized gains and losses of debt and equity securities classified as other securities for which fair values were available at March 31, 2017 and 2016, were as follows: Millions of yen

2017

Securities with unrealized gains: Equity securities Others Subtotal Securities with unrealized losses: Equity securities Others Subtotal Total

Carrying amount

Cost

Unrealized gains (losses)

¥200,280 — 200,280

¥35,723 — 35,723

¥164,557 — 164,557

11,414 — 11,414 ¥211,694

12,690 — 12,690 ¥48,414

(1,277) — (1,277) ¥163,280

Millions of yen

2016

Securities with unrealized gains: Equity securities Others Subtotal Securities with unrealized losses: Equity securities Others Subtotal Total

Carrying amount

Cost

Unrealized gains (losses)

¥172,068 — 172,068

¥36,960 — 36,960

¥135,107 — 135,107

10,070 1,534 11,604 ¥183,672

12,439 1,534 13,973 ¥50,934

(2,369) — (2,369) ¥132,738

Thousands of U.S. dollars

2017

Securities with unrealized gains: Equity securities Others Subtotal Securities with unrealized losses: Equity securities Others Subtotal Total

Carrying amount

Cost

Unrealized gains (losses)

$1,785,186 — 1,785,186

$318,415 — 318,415

$1,466,771 — 1,466,771

101,738 — 101,738 $1,886,924

113,112 — 113,112 $431,536

(11,382) — (11,382) $1,455,388

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(b) Realized gains and losses on the sale of other securities The realized gains and losses on the sale of other securities during the years ended March 31, 2017 and 2016, were as follows: Millions of yen

2017 ¥12,087 9,918 —

Selling amount Gain on sales of securities Loss on sales of securities

Thousands of U.S. dollars

2016 ¥10,396 8,275 —

2017 $107,737 88,404 —

(c) Loss on other devaluation of investment securities whose fair values are readily determinable Loss on other devaluation of investment securities whose fair values are readily determinable for the year ended March 31, 2017, was ¥101 million (US$900 thousand), which is for other securities, and for the year ended March 31, 2016, ¥924 million, which is the sum of ¥796 million for equity securities of unconsolidated subsidiaries and affiliates, and ¥127 million for other securities. Among the loss on other devaluation of investment securities for the year ended March 31, 2016, ¥561 million was recorded under business structure improvement expenses.

12. Derivative financial instruments (a) Derivative financial instruments for which hedge accounting is not applied i) Foreign exchange forward contracts Millions of yen

2017 Classification

Off-market transactions

Items

Foreign exchange forward contracts: Selling: U.S. dollar Euro Thai baht Singapore dollar British pound Buying: U.S. dollar Euro Thai baht Total

Amount of contract

Amount of contract over 1 year

Fair value

Profit (loss) from valuation

¥24,981 9,289 879 11 52

¥— — — — —

¥ 100 (9) 11 (0) 0

¥ 100 (9) 11 (0) 0

1,827 45,868 4 ¥82,911

— — — ¥—

(376) (48) (0) ¥(322)

(376) (48) 0 ¥(322)

Amount of contract

Amount of contract over 1 year

Fair value

Profit (loss) from valuation

¥21,694 6,137 1,115 396 —

¥ — — — — —

¥698 16 (0) 40 —

¥698 16 (0) 40 —

2,679 0 9 ¥32,030

728 — — ¥728

(148) (0) (0) ¥605

(148) (0) (0) ¥605

Millions of yen

2016 Classification

Off-market transactions

90

Asahi Kasei Report 2017

Items

Foreign exchange forward contracts: Selling: U.S. dollar Euro Thai baht Singapore dollar British pound Buying: U.S. dollar Euro Thai baht Total

Thousands of U.S. dollars

2017 Classification

Off-market transactions

Items

Amount of contract

Amount of contract over 1 year

Fair value

Profit (loss) from valuation

$222,667 82,797 7,835 98 463

$— — — — —

$   891 (80) 98 (0) 0

$   891 (80) 98 (0) 0

16,285 408,842 36 $739,023

— — — $—

(3,351) (428) 0 $(2,870)

(3,351) (428) 0 $(2,870)

Foreign exchange forward contracts: Selling: U.S. dollar Euro Thai baht Singapore dollar British pound Buying: U.S. dollar Euro Thai baht Total

(b) Derivative financial instruments for which hedge accounting is applied i) Foreign exchange forward contracts Millions of yen

2017 Classification

Principle-based accounting

Items

Hedged assets/liabilities

Foreign exchange forward contracts: Selling: U.S. dollar Accounts receivable—trade Euro Accounts receivable—trade Thai baht Accounts receivable—trade Singapore dollar Accounts receivable—trade Buying: U.S. dollar Accounts payable—trade Euro Accounts payable—trade Thai baht Accounts payable—trade Singapore dollar Accounts payable—trade Total

Amount of contract

Amount of contract over 1 year

Fair value

¥  619 109 11 —

¥— — — —

¥36 1 (0) —

1,445 2 106 — ¥2,292

— — — — ¥—

32 (0) 6 — ¥74

Millions of yen

2016 Classification

Principle-based accounting

Items

Hedged assets/liabilities

Foreign exchange forward contracts: Selling: U.S. dollar Accounts receivable—trade Euro Accounts receivable—trade Thai baht Accounts receivable—trade Singapore dollar Accounts receivable—trade Buying: U.S. dollar Accounts payable—trade Euro Accounts payable—trade Thai baht Accounts payable—trade Singapore dollar Accounts payable—trade Total

Amount of contract

Amount of contract over 1 year

Fair value

¥2,953 111 — 289

¥— — — —

¥(170) (2) — (12)

2,018 21 177 29 ¥5,596

— — — — ¥—

(62) (0) (6) 1 ¥(251)

Asahi Kasei Report 2017

91

Thousands of U.S. dollars

2017 Classification

Principle-based accounting

Items

Hedged assets/liabilities

Foreign exchange forward contracts: Selling: U.S. dollar Accounts receivable—trade Euro Accounts receivable—trade Thai baht Accounts receivable—trade Singapore dollar Accounts receivable—trade Buying: U.S. dollar Accounts payable—trade Euro Accounts payable—trade Thai baht Accounts payable—trade Singapore dollar Accounts payable—trade Total

Amount of contract

Amount of contract over 1 year

Fair value

$ 5,517 972 98 —

$— — — —

$321 9 (0) —

12,880 18 945 — $20,430

— — — — $—

285 (0) 53 — $660

ii) Interest-rate swaps, and interest-rate and currency swaps Millions of yen

2017 Classification

Special treatment for interest-rate swaps Special treatment for interest-rate and currency swaps

Items

Interest-rate swaps Pay fixed/receive floating Interest-rate and currency swaps U.S. dollar receive floating/ Thai baht pay fixed Total

Amount of contract

Amount of contract over 1 year

Fair value

Long-term loans payable

¥165,889

¥139,918

(*)

Long-term loans payable

324 ¥166,213

162 ¥140,080

(*) ¥—

Hedged assets/liabilities

Millions of yen

2016 Classification

Special treatment for interest-rate swaps Special treatment for interest-rate and currency swaps

Items

Interest-rate swaps Pay fixed/receive floating Interest-rate and currency swaps U.S. dollar receive floating/ Thai baht pay fixed Total

Amount of contract

Amount of contract over 1 year

Fair value

Long-term loans payable

¥76,871

¥64,084

(*)

Long-term loans payable

477 ¥77,349

318 ¥64,403

(*) ¥—

Hedged assets/liabilities

Thousands of U.S. dollars

2017 Classification

Special treatment for interest-rate swaps Special treatment for interest-rate and currency swaps

Items

Interest-rate swaps Pay fixed/receive floating Interest-rate and currency swaps U.S. dollar receive floating/ Thai baht pay fixed Total

Amount of contract

Amount of contract over 1 year

Fair value

Long-term loans payable

$1,478,643

$1,247,152

(*)

Long-term loans payable

2,888 $1,481,531

1,444 $1,248,596

(*) $—

Hedged assets/liabilities

(*) Fair value of interest-rate swaps and interest-rate and currency swaps, for which special treatment is applied, is included in fair value of the corresponding long-term loans payable for which hedge accounting is applied.

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13. Provision for retirement benefits Upon terminating employment, employees of the parent company and its subsidiaries are entitled, under most circumstances, to lump-sum severance indemnities and/or pension payments determined by reference mainly to their current basic rate of pay and length of service and/or defined contribution plans. Additional benefits may be granted to employees depending on the conditions under which termination of employment occurs. Certain consolidated subsidiaries adopt the simplified method in calculating expected defined benefit liability. Reconciliations of beginning and ending balances of projected benefit obligations for the fiscal years ended March 31, 2017 and 2016, were as follows: Millions of yen

Beginning balance of the projected benefit obligations Service cost Interest cost Actuarial gains/losses Payment of retirement benefits Other (*) Ending balance of the projected benefit obligations

2017 ¥398,588 15,581 677 2,133 (19,016) 169 ¥398,132

Thousands of U.S. dollars

2016 ¥352,813 13,604 3,439 44,020 (18,549) 3,260 ¥398,588

2017 $3,552,794 138,880 6,034 19,012 (169,498) 1,506 $3,548,730

(*) ¥3,101 million was recorded under Increase from changes in scope of consolidation for the years ended March 2016.

Reconciliations of beginning and ending balances of plan assets for the fiscal years ended March 31, 2017 and 2016, were as follows: Millions of yen

Beginning balance of plan assets Expected return Actuarial gains/losses Contributions Payment of retirement benefits Other Ending balance of plan assets

2017 ¥212,288 5,265 2,056 9,799 (9,532) (110) ¥219,765

Thousands of U.S. dollars

2016 ¥213,707 5,311 (6,598) 10,200 (10,146) (186) ¥212,288

2017 $1,892,219 46,929 18,326 87,343 (84,963) (980) $1,958,864

Reconciliations of ending balance of projected benefit obligations and the plan assets, and of net defined benefit liability and net defined benefit asset, as recorded in the consolidated balance sheet at March 31, 2017 and 2016, were as follows: Millions of yen

Thousands of U.S. dollars

Projected benefit obligations of funded plans Plan assets Subtotal Projected benefit obligations of unfunded plans Net of liability and asset that have been recorded in the consolidated balance sheets

2017 ¥ 256,082 (219,765) 36,318 142,050 ¥ 178,368

2016 ¥ 255,432 (212,288) 43,145 143,155 ¥ 186,300

2017 $ 2,282,574 (1,958,864) 323,719 1,266,156 $ 1,589,874

Net defined benefit liability Net of liability and asset that have been recorded in the consolidated balance sheets

¥ 178,368 ¥ 178,368

¥ 186,300 ¥ 186,300

$ 1,589,874 $ 1,589,874

Periodic retirement benefit expenses for employees and the breakdown of items for the years ended March 31, 2017 and 2016, were as follows: Millions of yen

Service cost (net of employee contributions) Interest cost Expected return on plan assets Amortization of actuarial gains/losses Amortization of prior service costs Additional retirement benefits and other Retirement benefit expenses of defined benefit plans

2017 ¥13,952 677 (5,265) 10,763 142 506 ¥20,775

Thousands of U.S. dollars

2016 ¥11,967 3,439 (5,311) 3,266 142 452 ¥13,956

2017 $124,360 6,034 (46,929) 95,935 1,266 4,510 $185,177

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The components of other comprehensive income on defined benefit plans for the fiscal years ended March 31, 2017 and 2016, were as follows: Millions of yen

Prior service costs Actuarial gains/losses Total

2017 ¥   142 10,685 ¥10,827

Thousands of U.S. dollars

2016 ¥    142 (47,352) ¥(47,210)

2017 $ 1,266 95,240 $96,506

Accumulated other comprehensive income on defined benefit plans at March 31, 2017 and 2016, was as follows: Millions of yen

Unrecognized prior service costs Unrecognized actuarial gains/losses Total

2017 ¥   219 47,783 ¥48,002

Thousands of U.S. dollars

2016 ¥   361 58,468 ¥58,829

2017 $  1,952 425,911 $427,863

Share by major classifications for plan assets at March 31, 2017 and 2016, was as follows: Bonds Stock Alternative investments Life insurance Cash and deposits Other Total

2017 37% 24 16 14 8 1 100%

2016 36% 21 16 14 10 3 100%

Note: Alternative investments include mainly investments in real estate and hedge funds.

The current and future allocation of plan assets, and the current and future long-term rate of expected return from the variety of assets that make up the plan assets, are considered in determining the long-term rate of expected return on plan assets. Major actuarial assumptions at March 31, 2017 and 2016, were as follows: Discount rate The long-term rate of expected return on plan assets Expected rate of increase in salary

2017 Mainly 0.1% Mainly 2.5% 2.3–7.1%

2016 Mainly 0.1% Mainly 2.5% 2.3–7.1%

Required payments to defined contribution plans at March 31, 2017, amounted to ¥1,874 million (US$16,704 thousand), and at March 31, 2016, amounted to ¥1,416 million.

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14. Taxes Income taxes applicable to the parent company and subsidiaries in Japan include (1) corporation tax, (2) enterprise tax, and (3) inhabitants tax. Significant components of deferred tax assets and liabilities at March 31, 2017 and 2016, were as follows: Millions of yen

Thousands of U.S. dollars

2017

2016

2017

Deferred tax assets: Net defined benefit liability Accrued bonuses Tax loss carry forwards Foreign tax credit carry forwards Unrealized gain on noncurrent assets and others Impairment losses Loss on disposal of noncurrent assets Depreciation Unrealized loss on investment securities Provision for periodic repairs Provision for product warranties Accrued enterprise tax Devaluation of inventories Allowance for doubtful accounts Asset retirement obligations Other Subtotal deferred tax assets Less: Valuation allowance Total deferred tax assets

¥   55,324 7,687 6,870 5,560 3,843 3,397 3,383 2,781 1,765 1,456 1,338 1,247 1,092 979 610 11,251 108,583 (10,054) 98,528

¥   57,150 7,682 8,105 5,319 4,004 4,332 4,198 2,696 2,073 1,283 1,168 2,074 1,057 821 813 10,197 112,969 (16,294) 96,676

$   493,128 68,518 61,235 49,559 34,254 30,279 30,154 24,788 15,732 12,978 11,926 11,115 9,733 8,726 5,437 100,285 967,849 (89,616) 878,224

Deferred tax liabilities: Unrealized gain on other securities Identified intangible assets during business combination Depreciation—overseas subsidiaries Deferred gain on property, plant and equipment Other Total deferred tax liabilities Net deferred tax assets (liabilities)

(51,508) (50,049) (13,405) (8,388) (5,388) (128,738) ¥ (30,210)

(42,075) (53,707) (13,158) (9,037) (5,519) (123,496) ¥ (26,820)

(459,114) (446,109) (119,485) (74,766) (48,026) (1,147,500) $  (269,275)

Net deferred tax assets (liabilities) at March 31, 2017 and 2016, were included in the following line items on the consolidated balance sheets. Millions of yen

Current assets—deferred tax assets Noncurrent assets—deferred tax assets Current liabilities—other Noncurrent liabilities—deferred tax liabilities

2017 ¥ 20,279 9,309 (39) (59,759)

Thousands of U.S. dollars

2016 ¥ 18,133 20,098 (120) (64,930)

2017 $ 180,756 82,975 (348) (532,659)

In the fiscal year ended March 31, 2017, environmental expenses, experiment and research expenses, deferred gains or losses on hedges, and accelerated depreciation, which had previously been reported separately, are included in other due to immateriality. Accordingly, the figures for other for the fiscal year ended March 31, 2016, includes ¥238 million in environmental expenses, ¥198 million in experiment and research expenses, ¥19 in deferred gains or losses on hedges, and ¥(137) million in accelerated depreciation.

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Reconciliation of the differences between the statutory tax rate and the effective income tax rate for the years ended March 31, 2017 and 2016, was as follows: Statutory tax rate Increase (reduction) in taxes resulting from: Non-deductible expenses and non-taxable income Equalization of inhabitants taxes R&D expenses deductible from income taxes Amortization of goodwill and negative goodwill Equity in (losses) earnings of unconsolidated subsidiaries and affiliates Undistributed earnings (losses) of foreign subsidiaries Difference of tax rates for foreign subsidiaries Valuation allowance Decrease in deferred tax assets due to the change in statutory tax rate Other Effective income tax rate

2017 30.9%

2016 33.1%

1.1 0.3 (3.7) 3.5 (1.0) 0.2 (1.2) (3.9) — (0.2) 25.9%

1.1 0.3 (4.6) 3.5 0.2 (0.1) (1.0) 0.7 1.9 1.1 36.2%

Revision of deferred tax assets and liabilities due to change in corporate tax rate, etc. The “Act for Partial Revision of the Act for Partial Revision of the Act for Consumption Tax for Drastic Reform of the Taxation System to Ensure Stable Financial Resources for Social Security” (Act No. 85 of 2016) and the “Act for Partial Revision of the Act for Partial Revision of the Act for Local Tax and Local Allocation Tax for Drastic Reform of the Taxation System to Ensure Stable Financial Resources for Social Security” (Act No. 86 of 2016) were issued on November 18, 2016. Accordingly, the statutory effective tax rate applied to the calculation of deferred tax assets and deferred tax liabilities for the fiscal year ended March 31, 2017, was changed from that applied to said calculation for the fiscal year ended March 31, 2016. The impact of this change is immaterial.

15. Business combinations Transactions under common control, etc. Merger by absorption of consolidated subsidiaries (a) Outline of the transaction i) Name and nature of business of merged companies Surviving company Name Nature of business

Asahi Kasei Corp. Diversified chemicals operations

Absorbed companies Name Nature of business

Asahi Kasei Chemicals Corp. Manufacture and sale of chemical products

Asahi Kasei Fibers Corp. Manufacture and sale of fiber products

Asahi Kasei E-materials Corp. Manufacture and sale of electronic materials

ii) Date of merger April 1, 2016

iii) Statutory form of merger Absorption-type merger with Asahi Kasei Corp. as the surviving company

iv) Name of surviving company Asahi Kasei Corp.

v) Other items related to outline of the transaction With the start of the Asahi Kasei Group’s new medium-term management initiative in fiscal 2016, the operating portfolio was realigned into three business sectors of Material (currently the Chemicals & Fibers segment and the Electronics segment), Homes (currently the Homes & Construction Materials segment), and Health Care. Within each business sector, portfolio-based management will be thoroughly implemented with optimum allocation of management resources, and further growth will be pursued by creating synergy among the sectors. Together with this change, in order to obtain efficient management and mutual coordination within the Material business sector and achieve greater corporate value, the decision was made to merge Asahi Kasei Chemicals Corp., Asahi Kasei Fibers Corp., and Asahi Kasei E-materials Corp. with the Company.

(b) Outline of the accounting treatment implemented The transaction was treated as a transaction under common control in accordance with the Accounting Standards Board of Japan (ASBJ) Statement No. 21 “Accounting Standard for Business Combinations” and ASBJ Guidance No. 10 “Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures.”

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16. Asset retirement obligations (a) Outline of asset retirement obligations Due to commitments pertaining to restoration to original state before vacating in accordance with land lease agreements such as for offices, and due to commitments to dismantle leased buildings upon termination of lease period, etc., in accordance with lease agreements for model home parks, relevant asset retirement obligations are recorded in the consolidated balance sheets. In accordance with building lease agreements such as for the head offices, commitments pertaining to restoration to original state before vacating are recognized as asset retirement obligations. However, instead of recording them as aforementioned asset retirement obligations under liabilities, the amount of lease deposit that cannot ultimately be expected to be collected was estimated in a reasonable manner, and of that, the amount corresponding to the fiscal year ended March 31, 2017, was recorded under operating expenses.

(b) Method of calculating the amount of relevant asset retirement obligations The calculation of asset retirement obligations is based on the following: expected term of use of 4 to 55 years, inflation rate of 0.0% to 4.1%, and discount rate of 0.0% to 5.4%.

(c) (Decrease) increase in the total amount of asset retirement obligations in the fiscal years ended March 31, 2017 and 2016 Millions of yen

2017 ¥4,047 37 136 (125) (88) ¥4,007

Balance at beginning of year Increase due to asset retirement obligations accrued Adjustment due to passage of time Decrease due to fulfillment of asset retirement obligations Decrease due to foreign exchange fluctuation Balance at end of year

Thousands of U.S. dollars

2016 ¥4,039 200 133 (193) (131) ¥4,047

2017 $36,073 330 1,212 (1,114) (784) $35,716

The amount of lease deposit which will be written off for a certain percentage at the end of the lease period is charged to expense rather than recorded under asset retirement obligations. Increase (decrease) in those expensed amounts for the fiscal years ended March 31, 2017 and 2016, were as follows: Millions of yen

2017 ¥1,733 79 (46) ¥1,766

Balance at beginning of year Increase due to new lease agreements Decrease due to the cancelation of existing lease agreements Balance at end of year

Thousands of U.S. dollars

2016 ¥1,650 126 (43) ¥1,733

2017 $15,447 704 (410) $15,741

17. Business segment information (a) Overview of reportable segments The Company’s business segments are based on organizational units for which separate financial information is available, and the Board of Directors carries out periodic review to allocate management resources and evaluate business performance. The Company is organized under an operating holding company configuration with the operating holding company and core operating companies performing operations in three business sectors. The operating holding company and each core operating company lays out strategy and develops business activities in Japan and abroad. With the start of a new medium-term management initiative in April 2016, the Company realigned its business portfolio. As a result, beginning with the first quarter of the year ended March 31, 2017, the Company’s operations were reclassified from the four reportable segments “Chemicals & Fibers,” “Homes & Construction Materials,” “Electronics,” and “Health Care,” together with an “Others” category, to the three reportable segments of “Material,” “Homes,” and “Health Care,” together with an “Others” category. Main products of the three reportable segments are as follows:

Material segment Fibers business The Company manufactures, processes, and sells elastic polyurethane filament, cupro fiber, nonwoven fabrics, and nylon 66 filament. Chemicals business The Company manufactures, processes, and sells petrochemical products (such as acrylonitrile, styrene, polyethylene, and polystyrene), performance polymer products (such as engineering plastics and synthetic rubber), and performance material and consumable products (such as coating materials, microcrystalline cellulose, explosives, explosion-bonded metal clad, hollow-fiber filtration membranes, ion-exchange membranes, electronic materials, food wrapping film, and plastic films, sheets, and foams).

Electronics business The Company manufactures, processes, and sells battery separator products (such as lithium-ion battery separator and lead-acid battery separator) and electronic devices (such as mixed-signal LSIs and Hall elements).

Homes segment Homes business The Company constructs unit homes and apartment buildings, and operates real estate businesses, remodeling businesses, and financial and other services. Construction Materials business The Company manufactures and sells autoclaved aerated concrete (AAC) panels, insulation panels, foundation systems, and structural components.

Health Care segment Pharmaceuticals business The Company manufactures and sells pharmaceuticals and diagnostic reagents. Medical Care business The Company manufactures and sells artificial kidneys, therapeutic apheresis devices, and virus removal filters. Critical Care business The Company manufactures and sells defibrillators and temperature management systems.

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(b) Methods to determine net sales, income or loss, assets, and other items by reportable business segment Profit by reportable business segment is stated on an operating income basis. Intersegment net sales and transfers are based on the values of transactions undertaken between third parties.

(c) Information concerning net sales, income or loss, assets, and other items for each reportable segment Millions of yen

2017 Sales: External customers Intersegment Total Operating income Assets Other items: Depreciation and amortization (Note 2) Amortization of goodwill Investments in affiliates accounted for using equity method Increase in property, plant and equipment, and intangible assets

Material

Homes

Health Care

Subtotal

Others (Note 1)

Total

¥  973,169 4,174 977,342 84,472 1,231,592

¥618,964 1,761 620,725 64,100 455,242

¥270,120 34 270,154 31,921 459,251

¥1,862,252 5,969 1,868,221 180,493 2,146,086

¥ 20,738 30,384 51,122 6,041 109,178

¥1,882,991 36,352 1,919,343 186,534 2,255,264

50,836 8,766

9,411 —

18,187 8,780

78,435 17,546

4,637 260

83,072 17,806

35,055

4,796

111

39,962

17,873

57,835

47,205

12,139

15,604

74,947

6,836

81,783

Notes: 1. The “Others” category includes electricity supply, plant engineering and environmental engineering, research and analysis, and employment agency/staffing operations. 2. Amortization of goodwill is not included. Millions of yen

2016 Sales: External customers Intersegment Total Operating income Assets Other items: Depreciation and amortization (Note 2) Amortization of goodwill Investments in affiliates accounted for using equity method Increase in property, plant and equipment, and intangible assets

Material

Homes

Health Care

Subtotal

Others (Note 1)

Total

¥1,004,438 3,761 1,008,198 79,209 1,224,287

¥632,418 53 632,472 71,000 449,289

¥285,404 48 285,452 36,235 474,265

¥1,922,261 3,862 1,926,123 186,444 2,147,842

¥ 18,653 41,854 60,508 3,781 101,418

¥1,940,914 45,716 1,986,630 190,225 2,249,260

51,337 5,887

9,529 —

21,539 9,646

82,406 15,533

4,624 288

87,030 15,821

31,993





31,993

17,541

49,534

57,185

11,947

19,382

88,514

4,706

93,220

Notes: 1. The “Others” category includes electricity supply, plant engineering and environmental engineering, research and analysis, and employment agency/staffing operations. 2. Amortization of goodwill is not included. Thousands of U.S. dollars

2017 Sales: External customers Intersegment Total Operating income Assets Other items: Depreciation and amortization (Note 2) Amortization of goodwill Investments in affiliates accounted for using equity method Increase in property, plant and equipment, and intangible assets

Material

Homes

Health Care

Subtotal

Others (Note 1)

Total

$ 8,674,294 37,205 8,711,489 752,937 10,977,734

$5,517,105 15,697 5,532,801 571,352 4,057,777

$2,407,701 303 2,408,004 284,526 4,093,511

$16,599,091 53,204 16,652,295 1,608,815 19,129,031

$184,847 270,826 455,673 53,846 973,153

$16,783,947 324,022 17,107,969 1,662,662 20,102,184

453,124 78,135

83,884 —

162,109 78,260

699,126 156,395

41,332 2,317

740,458 158,713

312,461

42,749

989

356,199

159,310

515,509

420,759

108,200

139,085

668,036

60,932

728,969

Notes: 1. The “Others” category includes electricity supply, plant engineering and environmental engineering, research and analysis, and employment agency/staffing operations. 2. Amortization of goodwill is not included.

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(d) Reconciliation of differences between total amounts of reportable segments and amounts appearing in the consolidated financial statements (adjustment of difference) Millions of yen

2017 ¥1,868,221 51,122 (36,352) ¥1,882,991

Sales

Total of reporting segments Net sales in “Others” category Elimination of intersegment transactions Net sales on consolidated statements of income

Thousands of U.S. dollars

2016 ¥1,926,123 60,508 (45,716) ¥1,940,914

2017 $16,652,295 455,673 (324,022) $16,783,947

Millions of yen

2017 ¥180,493 6,041 220 (27,525) ¥159,229

Operating income

Total of reporting segments Operating income in “Others” category Elimination of intersegment transactions Corporate expenses, etc.* Operating income on consolidated statements of income

Thousands of U.S. dollars

2016 ¥186,444 3,781 149 (25,171) ¥165,203

2017 $1,608,815 53,846 1,961 (245,343) $1,419,280

* Corporate expenses, etc. include corporate revenue, basic research expense, and group management expense, etc. which are not allocated to reporting segments. Millions of yen

2017 ¥2,146,086 109,178 (304,452) 303,688 ¥2,254,500

Assets

Total of reporting segments Assets in “Others” category Elimination of intersegment transactions Corporate assets* Total assets on consolidated balance sheets

Thousands of U.S. dollars

2016 ¥2,147,842 101,418 (318,969) 281,439 ¥2,211,729

2017 $19,129,031 973,153 (2,713,718) 2,706,908 $20,095,374

* Corporate assets include assets of the parent company—surplus operating funds (cash and deposits), long-term investment capital (investment securities, etc.), and land, etc.

Total of reportable segments Millions of yen

Other items 2017 Depreciation and amortization (Note 2) ¥78,435 Amortization of goodwill 17,546 Investments in affiliates accounted for using equity method 39,962 Increase in property, plant and equipment, and intangible assets 74,947

Thousands of U.S. dollars

Others Thousands of U.S. dollars

Millions of yen

Amounts from consolidated financial statements

Adjustments (Note 1) Thousands of U.S. dollars

Millions of yen

Millions of yen

Thousands of U.S. dollars

2016

2017

2017

2016

2017

2017

2016

2017

2017

2016

2017

¥82,406 15,533

$699,126 156,395

¥ 4,637 260

¥ 4,624 288

$ 41,332 2,317

¥8,315 —

¥6,782 —

$74,115 —

¥91,387 17,806

¥93,811 15,821

$814,573 158,713

31,993

356,199

17,873

17,541

159,310







57,835

49,534

515,509

88,514

668,036

6,836

4,706

60,932

8,790

5,780

78,349

90,573

99,000

807,318

Notes: 1. Adjustments include elimination of intersegment transactions and corporate expenses, etc. 2. Amortization of goodwill is not included.

(e) Related information i) Information on products and services Please refer to (c) Information concerning net sales, income or loss, assets, and other items for each reportable segment.

ii) Geographic information 1) Net sales Millions of yen

Thousands of U.S. dollars

2017

2016

2017

Japan

China

Other regions

Total

Japan

China

Other regions

Total

¥1,226,633

¥165,481

¥490,877

¥1,882,991

¥1,261,203

¥185,241

¥494,470

¥1,940,914

Japan

China

Other regions

$10,933,532 $1,475,007

Total

$4,375,408 $16,783,947

2) Property, plant and equipment. Millions of yen

Thousands of U.S. dollars

2017 Japan

¥371,654

2016

United States Other regions

¥86,780

¥98,447

Total

Japan

¥556,881

¥361,825

United States Other regions

¥91,425

¥102,739

2017 Total

Japan

¥555,989

$3,312,719

United States Other regions

$773,509

$877,502

Total

$4,963,731

3) Information by major customer Information by major customer is not shown because no customer accounts for 10% or more of net sales on the consolidated statements of income.

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18. Information on related parties Related party transactions (a) Transactions between the company submitting the consolidated financial statements and related parties i) Unconsolidated subsidiaries, affiliates, etc. of the company submitting the consolidated financial statements For the year ended March 31, 2017: Type of related party Name of company Location Paid-in capital Business line Share of voting rights held by the company (of which, indirectly held) Relationship with the related party Nature of transaction Transaction amount Amount name Balance at end of year

An affiliated company PTT Asahi Chemical Co., Ltd. Rayong, Thailand 13,819 million Thai baht Chemicals 50.0% (50.0%) Debt guarantee and seconded executive Guarantee for completion of manufacturing facilities ¥10,185 million (US$90,783 thousand) — —

For the year ended March 31, 2016: None

(b) Transactions between consolidated subsidiaries of the company submitting the consolidated financial statements and related parties i) Unconsolidated subsidiaries, affiliates, etc. of the company submitting the consolidated financial statements For the year ended March 31, 2017: None For the year ended March 31, 2016: Type of related party Name of company Location Paid-in capital Business line Share of voting rights held by the company (of which, indirectly held) Relationship with the related party Nature of transaction Transaction amount Amount name Balance at end of year

An affiliated company PTT Asahi Chemical Co., Ltd. Rayong, Thailand 14,246 million Thai baht in the year ended March 31, 2016 Chemicals 48.5% (48.5%) in the year ended March 31, 2016 Debt guarantee Guarantee for completion of manufacturing facilities ¥11,989 million — —

ii) Directors, Corporate Auditors, major shareholders, etc. of the company submitting the consolidated financial statements For the year ended March 31, 2017: None For the year ended March 31, 2016: Type of related party

A company in which close relative(s) of a Director or Corporate Auditor of the Company hold(s) a majority of voting rights Name of company Miwa-Syouji Co., Ltd. Location Nobeoka, Miyazaki, Japan Paid-in capital ¥65 million Business line Wholesale trade Share of voting rights held by the company 0.0% Relationship with the related party Purchasing consumable goods Nature of transaction Purchasing consumable goods Transaction amount ¥225 million Account recorded Accrued expenses Balance at end of year

¥23 million

A company in which close relative(s) of a Director or Corporate Auditor of the Company hold(s) a majority of voting rights Miwa Vinyl Co., Ltd. Nobeoka, Miyazaki, Japan ¥10 million Manufacture and sale of plastic packaging material 0.0% Purchasing consumable goods and raw materials Purchasing consumable goods and raw materials ¥45 million Accrued expenses and notes and accounts payable—trade ¥3 million

Notes: 1. Transaction amounts are shown net of consumption taxes, while balances at end of year include consumption taxes. 2. Transaction terms and the policy of deciding transaction terms: Ordinary transaction terms are applied to the purchase of products.

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19. Per share information Basic and diluted net assets per share and net income per share for the years ended March 31, 2017 and 2016, were as follows: Yen

Basic net assets per share Basic net income per share

U.S. dollars

2017 ¥824.36 82.34

2016 ¥745.94 65.69

2017 $7.35 0.73

(a) Basis for calculation of net assets per share Millions of yen

Total net assets Amount deducted from total net assets of which, non-controlling interests Net assets allocated to capital stock Number of shares of capital stock outstanding at fiscal year end used in calculation of net assets per share (thousand)

Thousands of U.S. dollars

2017 ¥1,168,115 16,771 (16,771) ¥1,151,344

2016 ¥1,057,399 15,498 (15,498) ¥1,041,901

2017 $10,411,935 149,487 (149,487) $10,262,448

1,396,657

1,396,755

1,396,657

(b) Basis for calculation of net income per share Millions of yen

Net income attributable to owners of the parent Amount not attributable to common stock shareholders Net income attributable to common stock owners of the parent Weighted-average number of shares of capital stock (thousand)

2017 ¥  115,000 — ¥  115,000 1,396,715

Thousands of U.S. dollars

2016 ¥   91,754 — ¥   91,754 1,396,812

2017 $1,025,047 — $1,025,047 1,396,715

Note: As the Company had no dilutive securities at March 31, 2017 and 2016, the Company does not disclose diluted net income per share for the years ended March 31, 2017 and 2016.

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101

20. Borrowings (a) Bonds payable at March 31, 2017 and 2016, comprised the following: Millions of yen

2017 ¥20,000 20,000 ¥40,000

Thousands of U.S. dollars

2016 ¥20,000 20,000 ¥40,000

2017 $178,269 178,269 $356,538

Year ending March 31

Millions of yen

Thousands of U.S. dollars

2018 2019 2020 2021 2022 2023 and thereafter Total

¥20,000 — 20,000 — — — ¥40,000

$178,269 — 178,269 — — — $356,538

Unsecured 1.46% yen bonds due in 2019 Unsecured 0.30% yen bonds due in 2017 Total Notes: 1. The current portion of bonds payable is recorded under current liabilities on the consolidated balance sheets. 2. The aggregate annual maturities of long-term debt after March 31, 2017, are as follows:

(b) Loans payable at March 31, 2017 and 2016, comprised the following: Millions of yen

Short-term loans payable with an interest rate of 0.90% Current portion of long-term loans payable with an interest rate of 1.56% Current portion of lease obligations with an interest rate of 1.44% Long-term loans payable (except portion due within one year) with an interest rate of 1.06% Lease obligations (except portion due within one year) with an interest rate of 1.48% Commercial papers (portion due within one year) with an interest rate of (0.02)% Total

2017 ¥ 88,965 24,510 305 192,584 467 56,000 ¥362,832

Thousands of U.S. dollars

2016 ¥273,418 40,169 919 94,632 537 — ¥409,675

2017 $  792,985 218,469 2,718 1,716,588 4,163 499,153 $3,234,085

Notes: 1. Interest rates shown are weighted average interest rates for the balance outstanding at March 31, 2017. 2. The aggregate annual maturities of long-term loans payable and lease obligations (except portion due within one year) after March 31, 2017, are as follows:

Long-term loans payable

Lease obligations

Year ending March 31

Millions of yen

Thousands of U.S. dollars

Millions of yen

Thousands of U.S. dollars

2018 2019 2020 2021 2022 and thereafter

¥59,796 21,279 22,900 32,790 55,819

$532,989 189,670 204,118 292,272 497,540

¥186 143 112 26 —

$1,658 1,275 998 232 —

21. Others Litigation On June 18, 2010, Koninklijke Philips Electronics N.V. and Philips Electronics North America Corporation (hereinafter collectively “Philips”) sued our subsidiary, ZOLL Medical Corporation (hereinafter “ZOLL”), in the United States District Court for the District of Massachusetts, alleging that several patents owned by Philips are infringed by certain ZOLL defibrillator products. On July 12, 2010, ZOLL sued Philips in the same court alleging that several ZOLL patents are infringed by certain Philips defibrillator products. The two cases were consolidated and bifurcated into an initial liability portion and a later damages portion. The liability portion was tried to a jury in December 2013, and the court entered an interlocutory judgment that ZOLL and Philips each infringe certain of the other’s patent rights. On August 18, 2016, following the conclusion of the appeal process relating to the interlocutory judgment, the United States District Court for the District of Massachusetts began a jury trial for the damages portion on July 24, 2017. The Company and ZOLL consider the allegations of Philips to be baseless, and will vigorously contest this litigation.

102

Asahi Kasei Report 2017

Asahi Kasei Report 2017

103

Major Subsidiaries and Affiliates (As of April 1, 2017)

Company

Major products/business line

Paid-in capital (million)

Processing of fibers Packaging, packing, and storage of fiber products Processing of tire cord, etc. Woven fabrics Processing of nonwovens Stockings and innerwear Dyeing and finishing of yarns and fabrics Sale of linings and interlinings Warp-knit spandex textiles Spandex Processing and sale of fibers and textiles Spandex Spandex Spunbond nonwovens Spandex Basic petrochemicals Polystyrene Butadiene Acrylonitrile, sodium cyanide, acrylamide, EDTA Acrylonitrile, methyl methacrylate Plastic coloring & compounding Processed plastic products Silicone Manufacturing Synthetic rubber Plastic compounding Sale of performance resin Coloring and compounding of performance resin Sale of performance resin Polyacetal Coloring and compounding of performance resin Performance resin Synthetic rubber Compounded performance resin operations Coloring and compounding of performance resin Sale of performance plastic compounds Epoxy resin Specialty chemicals Aluminum paste Electronic materials and devices Defense explosives Resin anchors, detonator housings/leads Glass fabric Industrial explosives High-performance HDI-based polyisocyanate Industrial filtration membranes and systems

¥ 50 ¥ 11 ¥ 50 ¥ 99 ¥ 20 ¥ 90 ¥ 50 ¥ 10 CNY 78 CNY 154 CNY 11 NT$ 1,003 THB 1,350 THB 1,835 € 28.4 ¥ 2,000 ¥ 5,000 ¥ 490 KRW 237,642 THB 13,818 ¥ 110 ¥ 160 ¥ 1,050 ¥ 10 ¥ 1,000 ¥ 10 CNY 10 CNY 50 CNY 18 CNY 265 THB 140 US$ 46.0 US$ 160 US$ 32 US$ 22 US$ 2 ¥ 300 ¥ 325 ¥ 250 ¥ 10 ¥ 100 ¥ 10 ¥ 50 ¥ 60 CNY 285 CNY 70

Equity interest (%)

Material Segment Asahi Kasei Fibers Nobeoka Co., Ltd.* Asahi Kasei Leona Filament Co., Ltd.* Asahi Cord Co., Ltd.* Kyokujitsu Textile Mills Co., Ltd.* Asahiozu Corp. Kyuasa Co., Ltd.* Fuji Seisen Co., Ltd.* Merci Co., Ltd.* Hangzhou Asahikasei Textiles Co., Ltd.* Hangzhou Asahikasei Spandex Co., Ltd.* Asahi Kasei Advance (Shanghai) Co., Ltd. Formosa Asahi Spandex Co., Ltd. Thai Asahi Kasei Spandex Co., Ltd.* Asahi Kasei Spunbond (Thailand) Co., Ltd.* Asahi Kasei Spandex Europe GmbH* Asahi Kasei Mitsubishi Chemical Ethylene Corp. PS Japan Corp.* Okayama Butadiene Co., Ltd. Tongsuh Petrochemical Corp., Ltd.* PTT Asahi Chemical Co., Ltd. Asahikasei Color Tech Co., Ltd.* Asahi Kasei Technoplus Co., Ltd.* Wacker Asahikasei Silicone Co., Ltd. Kakuichi Rubber Industry Co., Ltd. Japan Elastomer Co., Ltd.* Nobeoka Plastic Processing Co., Ltd.* Asahi Kasei Plastics (Guangzhou) Co., Ltd.* Asahikasei (Suzhou) Plastics Compound Co., Ltd. Asahikasei Plastics (Shanghai) Co., Ltd.* Asahi Kasei POM (Zhangjiagang) Co., Ltd.* Asahikasei Plastics (Thailand) Co., Ltd.* Asahi Kasei Plastics Singapore Pte. Ltd.* Asahi Kasei Synthetic Rubber Singapore Pte. Ltd.* Asahikasei Plastics (America) Inc.* Asahi Kasei Plastics North America, Inc.* Asahi Kasei Plastics Mexico S.A. de C.V.* Asahi Kasei Epoxy Co., Ltd.* Asahi Kasei Finechem Co., Ltd.* Asahi Kasei Metals Ltd.* Asahi Kasei EMS Co., Ltd.* Asahi SKB Co., Ltd.* Asahi Chemitech Co., Ltd.* Asahi-Schwebel Co., Ltd.* Kayaku Japan Co., Ltd. Asahi Kasei Performance Chemicals Corp.* Asahi Kasei Microza (Hangzhou) Co., Ltd.* * Consolidated subsidiary

104

Asahi Kasei Report 2017

100.0 100.0 100.0 100.0 50.0 94.0 78.7 100.0 93.0 100.0 100.0 50.0 60.0 84.3 100.0 50.0 62.1 50.0 100.0 50.0 100.0 99.0 50.0 50.0 75.0 100.0 100.0 51.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 50.0 100.0 100.0

Company

Major products/business line

Paid-in capital (million)

Equity interest (%)

Asahi Kasei Electronics Materials (Changshu) Co., Ltd.* Asahi Kasei Electronics Materials (Suzhou) Co., Ltd.* Asahi Kasei Wah Lee Hi-Tech Corp.* Asahi-Schwebel (Taiwan) Co., Ltd.* Asahi Photoproducts (UK) Ltd.* Asahi Photoproducts (Europe) SA/NV* Asahi Kasei Pax Corp.* Asahi Kasei Home Products Corp.* Sun Plastech Inc.* Sundic Inc. Asahi Kasei E-materials Korea Inc.* Celgard Korea, Ltd.* Polypore International, LP* Celgard, LLC* Daramic, LLC* Daramic Battery Separator India Pvt. Ltd.* Daramic S.A.S.* Daramic (Thailand) Ltd.* Polypore (Shanghai) Membrane Products Co., Ltd.* Daramic Tianjin PE Separator Co., Ltd.* Polypore K.K.* Daramic Separadores de Baterias Ltda.* Daramic Xiangyang Battery Separator Co., Ltd.* Asahi Kasei Electronics Co., Ltd.* Asahi Kasei Microsystems Co., Ltd.* Asahi Kasei Microdevices Korea Corp. AKM Semiconductor, Inc.*

Photosensitive dry film Photosensitive dry film Photosensitive dry film Glass fabric Sale of photopolymer, printing-plate making systems Sale of photopolymer, printing-plate making systems Packaging products and solutions Cling film, other household products Sale of purging compound Biaxially oriented polystyrene sheet Energy and electronic materials Lithium-ion battery separator Battery separators Lithium-ion battery separator Lead-acid battery separator Lead-acid battery separator Lead-acid battery separator Lead-acid battery separator Lithium-ion battery separator Lead-acid battery separator Lithium-ion and lead-acid battery separator Lead-acid battery separator Lead-acid battery separator Hall elements LSIs Electronic devices marketing and technical support Sale of LSIs

CNY 305 CNY 181 NT$ 49 NT$ 326 £ 0.3 € 3 ¥ 490 ¥ 250 US$ 1.0 ¥ 1,500 KRW 1,890 KRW 25,920 US$ 2,233 US$ 22 US$ 12 INR 0.3 € 73 THB 2,317 CNY 7 CNY 149 ¥ 16 BRL 0.3 CNY 194 ¥ 50 ¥ 50 KRW 820 US$ 2.9

100.0 100.0 80.6 51.0 100.0 100.0 100.0 100.0 100.0 50.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 65.0 100.0 100.0 100.0 100.0

Steel frames Construction of homes Rental home agency Condominium management Real estate development, brokerage, and related business Home maintenance and remodeling Financial services Plumbing and wiring work Building design and supervision External work Steel-frame members Installation of piles Exterior wall panel installation Construction materials processing Construction materials processing Construction materials processing

¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ US$ ¥ ¥ ¥ ¥ ¥

100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 80.0 100.0 100.0 100.0 100.0 100.0

Homes Segment Asahi Kasei Jyuko Co., Ltd.* Asahi Kasei Home Construction Corp.* Asahi Kasei Chintai Support Corp.* Asahi Kasei Fudousan Community Corp.* Asahi Kasei Realty & Residence Corp.* Asahi Kasei Reform Co., Ltd.* Asahi Kasei Mortgage Corp.* Asahi Kasei Lifeline Corp.* Asahi Kasei Sekkei Corp.* AJEX Corp.* Asahi Kasei Jyuko Vietnam Corp.* Asahi Kasei Foundation Systems Corp.* Asahi Kasei Extech Corp.* Iwakuni Sun Products Co., Ltd.* Sakai Kako Co., Ltd.* Hozumi Kako Co., Ltd.*

2,820 100 50 200 3,200 250 1,000 100 30 100.0 13.9 200 50 30 10 10.0

* Consolidated subsidiary

Asahi Kasei Report 2017

105

Major Subsidiaries and Affiliates

Company

Major products/business line

Paid-in capital (million)

Equity interest (%)

Medical devices, bioprocess products Medical devices Hemodialyzers; sale of medical devices Medical devices Sale of medical devices, medical systems Sale of medical devices, medical systems Bioprocess equipment and systems Sale of medical devices, medical systems Sale of virus removal filters Clinical trials for new drugs Acute critical care devices and systems Holding company for wearable defibrillator business IT solutions for acute critical care Intravascular temperature management systems

¥ ¥ CNY CNY KRW US$ US$ € € US$ US$ US$ US$ US$

10 140 165 24.7 1,000 0.5 30 18 0.5 49 1,723 10 1 23

100.0 100.0 100.0 81.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Sale of Asahi Kasei products Employment agency, consulting Electricity and steam Plant, equipment, process engineering Real estate rental Receiving and storage of fuel and feedstocks IT-related business Company housing, recreational facilities Processing of polyethylene pipe Electrical, IT, and control engineering Synthetic resin, fabricated plastic products Printing, bookbinding, and office work Insurance agency, cellular phone sales, bowling alley Information and analysis Cable TV Travel agency Computer software, IT systems Machinery installation Investment and business support services Processed yarn Business support services Development of aluminum nitride substrates and UV LEDs Business support services Business support services, sale of performance resin

¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ CNY THB Rs US$ US$ €

500 80 10 400 160 100 400 20 10 100 5,000 40 30 1,000 414 30 800 100 2,214 134 45 40 0.1 1

100.0 100.0 61.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 29.5 100.0 100.0 100.0 50.0 34.0 49.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Health Care Segment Asahi Kasei Medical MT Corp.* Med-Tech Inc.* Asahi Kasei Medical (Hangzhou) Co., Ltd.* GLT Medical Co., Ltd. Asahi Kasei Medical Trading (Korea) Co., Ltd.* Asahi Kasei Medical America Inc.* Asahi Kasei Bioprocess America, Inc.* Asahi Kasei Medical Europe GmbH* Asahi Kasei Bioprocess Europe SA/NV* Asahi Kasei Pharma America Corp.* ZOLL Medical Corporation* ZOLL LifeVest Holdings LLC* ZOLL Data Systems, Inc.* ZOLL Circulation, Inc.*

Others Asahi Kasei Advance Corp.* Asahi Kasei Amidas Co., Ltd.* Asahi Kasei NS Energy Corp.* Asahi Kasei Engineering Corp.* Asahi Kasei Office One Co., Ltd.* Asahi Kasei New Port Terminal Co., Ltd.* Asahi Kasei Networks Corp. Asahi Kasei Benefits Management Corp.* Asahi Kasei AS Tech Co., Ltd. Asahi Kasei EIC Solutions Corp. Asahi Yukizai Corp. Asahi Kasei Ability Corp. New Asahi Services Co., Ltd.* Asahi Research Center Co., Ltd.* Cable Media Waiwai Co., Ltd.* ELORTO Corp. AJS Inc. Koyo Machinery Works Co., Ltd.* Asahi Kasei (China) Co., Ltd.* Asahi Kasei Advance (Thailand) Co., Ltd.* Asahi Kasei India Pvt. Ltd. Crystal IS, Inc.* Asahi Kasei America, Inc.* Asahi Kasei Europe GmbH* * Consolidated subsidiary

106

Asahi Kasei Report 2017

Company Information/Investors Information (as of March 31, 2017)

■ Corporate Profile Company Name

Asahi Kasei IR Website Asahi Kasei Corporation

Date of Establishment May 21, 1931 Paid-in Capital

¥103,389 million

Employees

33,720 (consolidated)



7,356 (non-consolidated)

Asahi Kasei’s financial results and other materials for investors are available in our IR website. http://www.asahi-kasei.co.jp/asahi/en/ir

■ Asahi Kasei Group Offices Asahi Kasei Corporation

Core Operating Companies

Tokyo Head Office 1-105 Kanda Jinbocho, Chiyoda-ku, Tokyo 101-8101 Japan Phone: +81-3-3296-3000 Fax: +81-3-3296-3161

Asahi Kasei Microdevices 1-105 Kanda Jinbocho, Chiyoda-ku, Tokyo 101-8101 Japan Phone: +81-3-3296-3911

Asahi Kasei (China) Co., Ltd. 8/F, One ICC, Shanghai International Commerce Centre No. 999 Huai Hai Zhong Road, Shanghai 200031 China Phone: +86-21-6391-6111 Fax: +86-21-6391-6686

Asahi Kasei Homes 1-24-1 Nishi-shinjuku, Shinjuku-ku, Tokyo 160-8345 Japan Phone: +81-3-3344-7111

Beijing Office Room 1407 New China Insurance Tower No. 12 Jian Guo Men Wai Avenue Chao Yang District, Beijing 100022 China Phone: +86-10-6569-3939 Fax: +86-10-6569-3938 Asahi Kasei America, Inc. 800 Third Avenue, 30th Floor, New York, NY 10022 USA Phone: +1-212-371-9900 Fax: +1-212-371-9050 Asahi Kasei Europe GmbH Am Seestern 4, 40547 Düsseldorf, Germany Phone: +49-211-8822-030 Fax: +49-211-8822-0333

Asahi Kasei Construction Materials 1-105 Kanda Jinbocho, Chiyoda-ku, Tokyo 101-8101 Japan Phone: +81-3-3296-3500 Asahi Kasei Pharma 1-105 Kanda Jinbocho, Chiyoda-ku, Tokyo 101-8101 Japan Phone: +81-3-3296-3600 Asahi Kasei Medical 1-105 Kanda Jinbocho, Chiyoda-ku, Tokyo 101-8101 Japan Phone: +81-3-3296-3750 ZOLL Medical Corporation 269 Mill Rd., Chelmsford, MA 01824-4105 USA Phone: +1-978-421-9655

Asahi Kasei India Pvt. Ltd. The Capital 801C, Plot No. C70, G Block, Bandra Kurla Complex, Bandra (East), Mumbai 400051 India Phone: +91-22-6710-3962

■ Investors Information Stock Listing Tokyo Stock Code 3407 Authorized Shares 4,000,000,000 Outstanding Shares 1,402,616,332 Transfer Agent Sumitomo Mitsui Trust Bank, Ltd. Independent Auditors PricewaterhouseCoopers Aarata LLC Number of Shareholders 76,784

Largest Shareholders

% of equity*

JP Morgan Chase Bank 380055

6.28

The Master Trust Bank of Japan, Ltd. (trust account)

5.19

Nippon Life Insurance Co.

4.68

Japan Trustee Services Bank, Ltd. (trust account)

3.68

Sumitomo Mitsui Banking Corp.

2.52

Asahi Kasei Group Employee Stockholding Assn.

2.44

Japan Trustee Services Bank, Ltd. (trust account 9)

2.03

Japan Trustee Services Bank, Ltd. (trust account 5)

1.71

Mizuho Bank, Ltd.

1.45

Tokio Marine & Nichido Fire Insurance Co., Ltd.

1.43

* Percentage of equity ownership after exclusion of treasury stock.

Asahi Kasei Report 2017

107

1-105 Kanda Jinbocho, Chiyoda-ku, Tokyo 101-8101 Japan www.asahi-kasei.co.jp/asahi/en

Corporate Communications Tel: +81-3-3296-3008, Fax: +81-3-3296-3162

Printed in Japan 2017.12